AUD/USD Forex Technical Analysis – Confirmation of Closing Price Reversal Top Could Trigger 2-3 Day Correction

The risk sensitive Australian Dollar slipped on Thursday as concerns about rising inflation and less-loose central bank policy dented risk sentiment. The Aussie started the session higher before closing lower, forming a potentially bearish closing price reversal top. The confirmation of this chart pattern will shift momentum to the downside.

On Thursday, the AUD/USD settled at .7465, down 0.0050 or +0.67%.

Fundamentally, the U.S. Dollar was supported by better jobs and housing data, and a rise in U.S. Treasury yields.

Data showed that the number of Americans filing new claims for unemployment benefits dropped to a 19-month low last week, pointing to a tightening labor market, though a shortage of workers could keep the pace of hiring moderate in October.

Additionally, U.S. home sales also surged to an eight-month high in September, but higher prices as supply remains tight are squeezing first-time buyers out of the housing market.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum may be getting ready to shift to the downside with the formation of a closing price reversal top.

The confirmation of the closing price reversal top won’t change the main trend to down, but it could trigger the start of a 2 to 3 day correction. A trade through .7458 will confirm the chart pattern.

A move through .7547 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor trend is also up. A trade through .7379 will change the minor trend to down. This will confirm the shift in momentum.

On the upside, the key resistance is the long-term 50% level at .7499.

On the downside, support is layered at .7463 and .7435. This is followed by a support cluster at .7379 and a retracement zone at .7358 to .7314.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Friday is likely to be determined by trader reaction to .7463.

Bullish Scenario

A sustained move over .7463 will indicate the presence of buyers. If this move generates enough upside momentum then look for a surge into .7499. Overcoming this level will indicate the buying is getting stronger with .7547 the next target.

Taking out .7547 will negate the closing price reversal top and signal a resumption of the uptrend. This could trigger an acceleration into a pair of main tops at .7599 and .7617.

Bearish Scenario

A sustained move under .7463 will signal the presence of sellers. The first downside target is .7435. This 50% level is a potential trigger point for an acceleration into the support cluster at .7379, followed by the short-term retracement zone at .7358 to .7314. Since the main trend is up, buyers are likely to show up on a test of this area.