AUD/USD Forex Technical Analysis – Could Be Headed into .6931 to .6908

The Australian Dollar is trading slightly higher early Tuesday as investors await the release of the latest interest rate decision and monetary policy statement by the Reserve Bank of Australia (RBA) at 14:30 GMT. RBA Governor Philip Lowe is also expected to give a speech later in the session. Traders expect central bank policymakers to cut their benchmark rate 25 basis points to 1.00%.

At 02:51 GMT, the AUD/USD is trading .6975, up 0.0010 or +0.15%.

On Monday, the Aussie posted its biggest one-day drop in more than two months as longs liquidated ahead of the RBA decisions and in reaction to a jump in U.S. Treasury yields, which made the U.S. Dollar a more attractive investment.

Aussie traders were more focused on the widening of the interest rate differential between U.S. Government bonds and Australian Government bonds than the resumption of the trade talks between the United States and China.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum may be getting ready to shift to the downside with the formation of the closing price reversal top on Monday. After confirming the uptrend, the Aussie slammed into a wall of sellers waiting at a 50% level. Furthermore, with the AUD/USD up nine sessions from its last main bottom, it began the day inside the window of time for a closing price reversal top.

A trade through .7031 will negate the closing price reversal top and signal a resumption of the uptrend.

A trade through .6956 will confirm the closing price reversal top. This could trigger the start of a 2 to 3 day correction equal to at least 50% to 61.8% of the last rally. Given the size of Monday’s break, we’re almost there.

One main range we are dealing with was formed by the January 3 bottom at .6764 and the January 31 top at .7296. Its retracement zone is .7030 to .6967. On Monday, the AUD/USD slammed into the 50% level at .7031 and was promptly met by profit-takers and short-sellers.

The short-term range is .6832 to .7031. Its retracement zone at .6931 to .6908 is the primary downside target. Since the main trend is up, buyers could come in on a test of this area.

Monday’s range is a minor range of .7031 to .6956. Its 50% level or pivot at .6994 is potential resistance.

Daily Swing Chart Technical Forecast

Based on Monday’s close at .6965 and the early price action, the direction of the AUD/USD is likely to be determined by trader reaction to the Fibonacci level at .6967.

Bullish Scenario

A sustained move over .6967 will indicate the return of buyers. They could drive the AUD/USD into .6994. Look for sellers on the first test. Overtaking this level, however, could lead to a retest of .7031.

Taking out .7031 will negate the closing price reversal top and signal a resumption of the uptrend with the next target another major 50% level at .7079.

Bearish Scenario

A sustained move under .6967 will signal the presence of sellers. Taking out .6956 will confirm the closing price reversal top and shift momentum to the downside. This could lead to a test of the retracement zone at .6931 to .6908. Watch for buyers on this move.

The trigger point for an acceleration to the downside is .6908.