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James Hyerczyk
Australian Dollar AUD/USD

The Australian Dollar is under pressure on Tuesday as technical traders continue to respond to Friday’s bearish closing price reversal top chart pattern. Fundamentally, Macroeconomics says Australia is “entering secular stagnation proper for the first time as household debt hits unsustainable highs and the mass immigration economy imports a deflation tsunami into the labor market. Even as the central bank sets itself the impossible task of reflating it.”

At 07:22 GMT, the AUD/USD is trading .7022, down 0.0014 or -0.20%.

Westpac Chief Economist Bill Evans noted, “that while the July RBA Board Minutes imply a pause in the easing cycle at its August meeting, the vulnerability of the RBA’s unemployment forecast for 2020 (to be updated in the August SoMP) implies that every meeting after August will be “live” and the RBA may not wait until November (Westpac’s forecast) to deliver another 25bp cut.”


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but the closing price reversal top at .7082 on July 19 and Monday’s subsequent confirmation of the chart pattern, has sucked the momentum out of the uptrend.

The main trend will change to down on a trade through .6996. A move through .7082 will negate the closing price reversal top and signal a resumption of the uptrend.

The major range is .7394 to .6764. Its retracement zone at .7079 to .7153 is controlling the longer-term direction of the AUD/USD. Its lower or 50% level at .7079 essentially stopped the rally on Friday at .7082.

The range for the year is .6764 to .7296. Its retracement zone at .7030 to .6967 is currently being tested. Bullish traders may try to establish support inside this zone, but if it fails then we could see another drive toward the low of the year at .6764 over the near-term.

Daily AUDUSD (Close-Up)

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to the 50% level at .7030.

Bearish Scenario

A sustained move under .7030 will indicate the presence of sellers. If this move creates enough downside momentum then look for a break into the main bottom at .6996. Taking out this bottom will change the main trend to down, setting up a potential break into the Fibonacci level at .6967. We could see an acceleration into .6910 if the Fib level is taken out with heavy selling pressure.

Bullish Scenario

A sustained move over .7030 will signal the presence of buyers. The next potential upside target is the price cluster formed by the 50% level at .7079 and the main top at .7082.

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