The Australian Dollar is inching higher early Wednesday, still trying to claw back most of Monday’s steep loss. On Tuesday the Aussie posted a strong gain despite a 25 basis point rate cut by the Reserve Bank of Australia.

Part of the reason for the rally was that the rate cut had been telegraphed for weeks. Secondly, policymakers signaled that they’re not in a rush to cut again and finally, weaker Treasury yields are tightening the spread between U.S. Government bonds and Australian Government bonds and this is making the U.S. Dollar a less-attractive asset.

At 04:28 GMT, the AUD/USD is trading .6997, up 0.0003 or -0.04%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be shifting to the downside, following Monday’s closing price reversal top. The chart pattern just has to be confirmed.

A trade through .7031 will negate the closing price reversal top. This will also signal a resumption of the uptrend.

A move through .6956 will confirm the closing price reversal top. This will shift momentum to the downside. The main trend officially turns down on a move through .6832.

Currently, two major retracement zones are in play. The first is .7030 to .6967. The second is .7079 to .7153.

The minor range is .7031 to .6956. Its 50% level or pivot at .6993 is controlling the near-term direction of the Forex pair.

The short-term range is .6832 to .7031. If the reversal top is confirmed then its retracement zone at .6931 to .6908 will become the primary downside target.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to the pivot at .6993.

Bullish Scenario

A sustained move over .6993 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the 50% level at .7030 and the closing price reversal top at .7031. The latter is also the trigger point for an acceleration to the upside with the next targets a main top at .7069 and another 50% level at .7079.

Bearish Scenario

A sustained move under .6993 will signal the presence of sellers. This could lead to a quick test of the Fibonacci level at .6967. This is followed by the low at .6956.

Taking out .6956 will confirm the closing price reversal top, setting up the AUD/USD for a break into the short-term retracement zone at .6931 to .6908.