AUD/USD Forex Technical Analysis – Could Meet Resistance Inside .7699 to .7746 Retracement Zone

The AUD/USD finished higher on Friday amid thin trading conditions ahead of the long Christmas holiday week-end. The Aussie was mostly supported by rising commodity prices and a weaker U.S. Dollar. Rising U.S. Treasury yields likely helped limit gains.

Daily Swing Chart Analysis

The main trend is up according to the daily swing chart. After a prolonged move down in terms of price and time, the AUD/USD trend turned higher on December 14 when strong buying drove the Forex pair through the main top at .7653. The next main top target is the November 2 main top at .7729.

The main range is .7897 to .7501. Its retracement zone at .7699 to .7746 is currently being tested. This zone is controlling the longer-term direction of the AUD/USD.

With the Forex pair finishing inside its retracement zone, the 50% level at .7699 becomes the new support. Holding above this level could generate the upside momentum needed to drive the AUD/USD into the main top at .7729 then the Fibonacci level at .7746.

Short-term, the AUD/USD is picking up strength due to rising commodity prices such as copper and gold. Over the long-run however, the Aussie rally is likely to be capped by rising U.S. Treasury yields. With the Reserve Bank of Australia holding neutral on interest rates and the Fed likely to increase rates at least three times in 2018, the interest rate differential between Australian Government Bonds and U.S. Government Bonds is likely to tighten. This will eventually make the U.S. Dollar a more attractive investment.