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James Hyerczyk

There has been little trading in the Australian Dollar this week due to a two-day bank holiday in Australia and Tuesday’s Christmas holiday in the United States. Without the major banks and institutions trading, volume was extremely light as well as volatility.

However, when the market’s reopen on Wednesday, we’re likely to see a price gap and wide trading ranges due to the heightened volatility in the U.S. and Asian stock markets. The dollar has been getting pounded this week due to flight to safety buying into the Japanese Yen and Swiss Franc. The catalysts seem to be concerns over the U.S. government shutdown and the stock market meltdown.

At 2118 GMT, the AUD/USD is trading .7041, down 0.0007 or -0.10%. On Friday, December 21, the last full day of trading, the AUD/USD settled at .7032, down .0079 or -1.12%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7031 will signal a resumption of the downtrend. The main trend will change to up on a move through .7247.

The AUD/USD is in no position to change the trend to up, but it is eight sessions down from its last main top which puts it in the window of time for a closing price reversal bottom. This move won’t change the trend to up, but it could trigger a 2 to 3 day counter-trend rally.


Daily Retracement Level Technical Analysis

The long-term range is .7020 to .7394. Its retracement zone at .7207 to .7163 is resistance.

The main range is .7394 to .7031. Its retracement zone at .7213 to .7255 is additional resistance.

The short-term range is .7247 to .7031. Its 50% level at .7139 is another resistance level.

Daily Swing Chart Technical Forecast

Based on last Friday’s close at .7032, the direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to the October 20 main bottom at .7020.

Bullish Scenario

A sustained move over .7020 will indicate the presence of buyers. If this move can create enough upside momentum then look for the rally to possibly extend into .7139 to .7163.

Bearish Scenario

A sustained move under .7020 will signal the presence of sellers. This could trigger an acceleration into the February 9, 2016 main bottom at .6973. This price is another trigger point for an acceleration into the January 26, 2016 main bottom at .6917.

The daily chart indicates there is even more room to the downside under .6917 with the next major target the January 15, 2016 main bottom at .6826.

Closing Price Reversal Bottom

Taking out .7031 then turning higher for the session will put the AUD/USD in a position to form a potentially bullish closing price reversal bottom. If confirmed, this could trigger a 2 to 3 day counter-trend rally.

Look for extreme volatility today due to the stock market turmoil and the geopolitical problems in the United States.

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