AUD/USD Forex Technical Analysis – Major Decision for Bulls on Test of .7303 to .7392

The Australian Dollar is trading nearly flat on Thursday after posting a strong reversal to the upside the previous session. The recovery in the currency was fueled by increased demand for riskier assets after a stock market rebound in the United States, following three days of intense selling pressure.

Despite the rally, gains are being capped amid concerns around worsening diplomatic ties with China over the treatment of the countries’ journalists. Additionally, investors are also nervously monitoring an outbreak of coronavirus infections in the state of Victoria.

At 06:42 GMT, the AUD/USD is trading .7278, down 0.0005 or -0.07%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of a closing price reversal top on September 1. A trade through .7414 will signal a resumption of the uptrend, while a move through the last main bottom at .7136 will change the main trend to down.

The minor trend is down. This confirmed the shift in momentum. A trade through .7309 will change the minor trend to up. Yesterday’s minor reversal bottom also signals that momentum may be getting ready to shift to the upside. A trade through .7192 will negate the chart pattern and signal increased selling pressure.

The short-term range is .7136 to .7414. Traders are currently trying to establish support at its retracement zone at .7275 to .7242.

The new minor range is .7414 to .7192. Its retracement zone at .7303 to .7329 is the next potential upside target.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the AUD/USD on Thursday is likely to be determined by trader reaction to the short-term 50% level at .7275.

Bullish Scenario

A sustained move over .7275 will indicate the presence of buyers. This should trigger a labored rally into a minor 50% level at .7303, a minor top at .7309 and a minor Fibonacci level at .7392. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .7275 will signal the presence of sellers. The first downside target is the short-term Fib at .7242, followed by yesterday’s low at .7192.

Side Notes

Trader reaction to .7303 to .7329 should determine the near-term direction of the AUD/USD.

Aggressive counter-trend sellers are likely to show up on a test of this zone in an effort to form a potentially bearish secondary lower top. Trend traders are going to try to take out this are as they try to establish a new higher bottom at .7192.

Risk sentiment is likely to be the catalyst driving the price action.

For a look at all of today’s economic events, check out our economic calendar.