AUD/USD Forex Technical Analysis Forecast – Closing Price Reversal Top May Be Signaling Momentum Shift

The Australian Dollar finished lower on Monday as the U.S. Dollar strengthened on end of the month position squaring. A drop in demand for higher risk assets also weighed on the Aussie, encouraging some traders to book profits after a month-long rally that saw the currency post a nearly 5% gain. Some traders also pitched long positions ahead of the Reserve Bank of Australia (RBA) interest rate decision early Tuesday although most analysts expect central bank policy makers to leave its benchmark rate unchanged.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum may be getting ready to shift to the downside with the formation of a potentially bearish closing price reversal top on Monday.

A trade through .7407 will negate the chart pattern and signal a resumption of the uptrend, while a move through .7255 will change the main trend to down.

The minor range is .7255 to .7407. Its retracement zone at .7331 to .7313 is the first downside target. Since the main trend is up, buyers are likely to come in on a test of this area. If it fails, then look for the pullback to extend into the next retracement zone at .7252 to .7202.

Daily Swing Chart Technical Forecast

Based on yesterday’s price action, the direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to Monday’s low at .7339.

Bearish Scenario

Taking out .7339 will confirm the closing price reversal top. This won’t change the main trend to down, but if this move creates enough downside momentum then look for the break to extend into the retracement zone at .7331 to .7313. Look for buyers on the first test of this area.

A move through .7313 will indicate the counter-trend selling is getting stronger. This could trigger an acceleration into the support cluster at .7255 – .7252.

Bullish Scenario

The inability to confirm the closing price reversal top or follow-through to the downside will signal the presence of buyers. If this move is able to generate enough upside momentum then look for a possible retest of .7407.

Overcoming .7407 will indicate the buying is getting stronger. Taking out the September 1 main top at .7414 could trigger an acceleration to the upside with the next target the August 9 main top at .7453.

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