AUD/USD Forex Technical Analysis – Failure at .7731 Could Trigger Long Awaited Correction

The Australian Dollar inched lower on Friday but remained inside the previous day’s range for a second session, indicating investor indecision and impending volatility. Profit-taking and rising U.S. Treasury yields contributed to the weakness.

The Aussie eased off a 2-1/2 peak at .7820 hit on Wednesday as investors speculated on when the U.S. Federal Reserve might taper its asset buying, sending longer-dated Australian yields to six-month highs.

On Friday, the AUD/USD settled at .7765, down 0.0002 or -0.03%.

Dealers said speculators pared some short positions in the U.S. Dollar on speculation the Fed would not now increase its bond buying program, given the rollout of coronavirus vaccines had improved the economic outlook for later in the year.

Instead, some officials had talked about tapering the purchases late in 2021, sooner than many in the market had anticipated. That combined with talk of more fiscal stimulus as Democrats took control of the Senate to push longer-term Treasury yields higher and gave the U.S. Dollar a lift after weeks of losses.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7820 will signal a resumption of the uptrend. The main trend will change to down on a move through .7643.

The minor trend is also up. The new minor top is .7820.

The minor range is .7643 to .7820. Its 50% level at .7731 provided support on Thursday and Friday.

The short-term range is .7339 to .7820. If the trend turns down then is 50% level at .7579 will become the next downside target. This is a potential trigger point for an acceleration to the downside.

Short-Term Outlook

Based on last week’s price action on the daily chart, the direction of the AUD/USD early next week is likely to be determined by trader reaction to the 50% level at .7731.

Bullish Scenario

Holding .7731 will indicate the presence of buyers. Overtaking and sustaining a move over .7820 will indicate the buying is getting stronger. This would put the Aussie on a path toward the March 14, 2018 main top at .7916.

Bearish Scenario

A sustained move under .7731 will signal the presence of sellers. This could trigger an acceleration to the downside since the next major target is the January 4 main bottom at .7643.

If .7643 fails then the main trend will change to down and the selling would likely extend into the 50% level at .7579.