AUD/USD Forex Technical Analysis – Lower Amid Mixed Business, Consumer Confidence Signals

The Australian Dollar is edging lower early Tuesday as data showed Australian business activity and costs surging but consumers turning more pessimistic by the day, pointing to higher rates in the short-term but lower yields further out.

At 05:17 GMT, the AUD/USD is trading .6975, down 0.0011 or -0.15%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $69.15, up $0.70 or +1.02%.

A measure of Australian business confidence rebounded in July as sales and profits held up surprisingly well in the face of rising interest rates and high inflation, though firms also reported record costs amid supply constraints, Reuters reported. That’s the good news.

The bad news is a measure of Australian consumer sentiment fell for a ninth straight month in August to depths last seen early in the pandemic as another hike in interest rates combined with the surging cost of living to sour the national mood, according to Reuters.

The strength in the business sector suggests the economy could handle another 50 basis-point rate hike by the Reserve bank of Australia (RBA) although the size of the next rate hike is still being debated.

While business seem to be thriving by passing along higher costs to consumers, it could be just a matter of time before consumer demand starts to deteriorate and the RBA slows the pace of rate hikes.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swig chart. A trade through .7047 will reaffirm the uptrend. A move through .6682 will change the main trend to down.

The minor trend is up. It turned back up on Monday. This is controlling the momentum. A trade through .6870 will change the minor trend to down.

The main range is .7283 to .6682. Its retracement zone at .6982 to .7053 is resistance. This zone stopped the buying at .7047 on August 1. The AUD/USD is currently testing this zone.

The minor range is .6859 to .7047. Its pivot comes in at .6953.

The short-term range is .6682 to .7047. Its retracement zone at .6864 to .6821 is potential support.

Daily Swing Chart Technical Analysis

Trader reaction to the main 50% level at .6982 is likely to determine the direction of the AUD/USD on Tuesday.

Bearish Scenario

A sustained move under .6982 will indicate the presence of sellers. The first downside target is the pivot at .6953. This is a potential trigger point for an acceleration to the downside with the short-term retracement zone at .6864 to .6821 the next target.

Bullish Scenario

A sustained move over .6982 will signal the presence of buyers. If this move is able to generate enough upside momentum then look for a surge into the main top at .7047, followed by the main Fibonacci level at .7053.

Side Notes

It looks as if the longer-term direction of the AUD/USD will be determined by trader reaction to the main retracement zone at .6982 to .7053. Right now it’s controlling the direction of the market.