AUD/USD Forex Technical Analysis – Needs to Hold .7252 to Sustain Upside Momentum

The Australian Dollar is edging higher on Monday, but showing a relatively tame response to the news of Joe Biden’s election as President of the United States over the weekend. Perhaps the story was priced in last week when the Aussie jumped 3.30%.

Additionally, now that Biden’s victory has been confirmed, the veil of uncertainty has been lifted, with traders likely shifting their attention back to last week’s Reserve Bank of Australia (RBA) monetary policy announcements.

At 08:10 GMT, the AUD/USD is trading .7288, up 0.0028 or +0.39%.

Last week, the RBA said it’s not contemplating any further interest rate reductions after slicing the cash rate to a wafer thin 0.1 percent. Nonetheless, it eased monetary policy believing that despite forecasting better economic outcomes in Australia, its outlook implies a large shortfall in activity that is inconsistent with full employment.

“Interest rates have been lowered as far as it makes sense to do so in the current environment,” the RBA said in its quarterly monetary policy statement released on Friday.

“The board considers that there is little to be gained from short-term interest rates moving into negative territory and continues to view a negative policy rate as extraordinarily unlikely.”

While reducing the cash rate to a record low, the RBA also lowered rates on its growing number of monetary policy tools, and entered into a $100 billion bond buying program.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was confirmed earlier today when buyers took out last Thursday’s high at .7289.

The uptrend will be reaffirmed when buyers take out the next swing top at .7345. A trade through .6991 will change the main trend to down. This is highly unlikely, but the prolonged move up in terms of price and time make the AUD/USD ripe for a potentially bearish closing price reversal top.

The main range is .7414 to .6991. The AUD/USD is currently trading on the strong side of its retracement zone at .7252 to .7202, putting it in a bullish position and establishing support at this zone.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the Fibonacci level at .7252.

Bullish Scenario

A sustained move over .7252 will indicate the presence of buyers. If this move creates enough upside momentum then we could see a breakout through the intraday high at .7300. This could trigger a surge into the main top at .7345.

Bearish Scenario

A sustained move under .7252 will signal the presence of sellers. This could trigger a further break into the 50% level at .7202. This is a potential trigger point for an acceleration to the downside.