AUD/USD Forex Technical Analysis – Decision Time Following Test of .7275 – .7242

The Australian Dollar is under pressure on Thursday as investors continue to react to the Gross Domestic Product report that showed Australia’s A$2 trillion ($1.47 trillion) economy has sunk into its first recession in almost three decades, with unemployment at a 22-year high and wages growth at all-time lows.

At 07:35 GMT, the AUD/USD is trading .7317, down 0.0020 or -0.27%.

Earlier in the session, a poll showed analysts doubt the rally can get much further, putting the currency at 0.7300 in six months and 0.7400 in one year amid expectations monetary policy will remain accommodative for a long time to come.

The Reserve Bank of Australia (RBA) has stepped in by slashing the cash rate to a record low 0.25%, launching an “unlimited” bond buying program and offering cheap funding to lenders. It has also promised to do more if needed.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on September 1.

A trade through .7414 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through the nearest swing bottom at .7136.

The short-term range is .7136 to .7414. Its retracement zone at .7275 to .7242 is the primary downside target. Since the main trend is up, buyers could come in on the first test of this zone.

Short-Term Outlook

Today is the second day down from the closing price reversal top. Usually, the minimum break is 2 to 3 day or 50% to 61.8% of the last rally. Currently, the AUD/USD is in a position to test this zone at .7275 to .7242.

Trader reaction to this zone will then determine the next move. It could be up as bearish traders may try to form a secondary lower top, or we could see an acceleration to the downside on a trade through the Fibonacci level at .7242.

The first move down from a major top is usually fueled by profit-taking. This is followed by a rally. The next move down, if there is one, will mean that new shorts have come into the market.