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James Hyerczyk

The Australian Dollar is mounting a strong recovery on Thursday after early session weakness failed to attract enough new sellers to continue yesterday’s steep sell-off. Traders could also be making position-adjustments related to yesterday’s U.S. Federal Reserve monetary policy decisions. We could also be looking at a positive response to mixed labor market data.

At 1052 GMT, the AUD/USD is trading .7142, up 0.0033 or +0.45%.

On Wednesday, the U.S. Federal Reserve raised its benchmark interest rate by 25-basis points but it also reduced the number of expected rate hikes in 2019. Going into the Fed’s decisions, Australian Dollar investors were expecting the Fed to announce it would take a pause in its aggressive monetary policy in 2019. In other words, there would be no rate hikes. Additionally, traders expected the Fed to be a little more cautious due to rising uncertainty about global economic growth. However, investors were surprised by the Fed’s commitment to retain the core of its plan to tighten monetary policy.

There were some small tweaks in the monetary policy statement including lowered growth and inflation expectations. However, these subtle changes were not as significant as investors had hoped.

In Australia, the Employment Change report showed the economy added 37.0K new jobs in November, however, the Unemployment Rate rose from 5.0% to 5.1%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum may be getting ready to shift to the upside with the formation of a potentially bullish closing price reversal bottom.

A trade through .7086 will signal a resumption of the downtrend. The main trend will change to up on a move through the last swing top at .7247. A close over .7108 will produce a closing price reversal bottom. If confirmed on Friday then this chart pattern could trigger the start of a 2-3 day counter-trend rally.

The main range is .7020 to .7394. Its retracement zone at .7163 to .7207 is the first target zone.

The short-term range is .7394 to .7086. Its retracement zone at .7240 to .7276 is the next upside target.

The best resistance is a price cluster formed by the combination of the short-term 50% level at .7240 and the main top at .7247.


Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the AUD/USD is likely to be determined by trader reaction to yesterday’s close at .7108.

Bullish Scenario

A sustained move over .7108 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the main Fibonacci level at .7263. Since the main trend is down, sellers could come in on the first test of this level. Overtaking it could trigger a surge into the main 50% level at .7207.

Bearish Scenario

A sustained move under .7108 will signal the presence of sellers. This could lead to a retest of today’s intraday low at .7086. If this level fails, we could see an acceleration into the October 20 bottom at .7020.

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