AUD/USD Forex Technical Analysis – Needs to Hold .7604 to Sustain Upside Bias, Could Weaken Under .7587

The Australian Dollar is under pressure on Friday following the release of the Reserve Bank’s (RBA) Financial Stability Review. The RBA said increased risk taking by optimistic borrowers could lead to a build-up of risks in the housing market, even if the banks maintained lending discipline.

In the semi-annual check of the financial system, the Reserve Bank downplayed the threat of rapidly rising house prices to financial stability, saying it had not been accompanied by a build-up in debt.

At 04:54 GMT, the AUD/USD is trading .7633, down 0.0021 or -0.28%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7677 will signal a resumption of the uptrend. The main trend will change to down on a move through .7532.

The minor range is .7532 to .7677. Its retracement zone at .7604 to .7587 is potential support. Buyers could step in on a test of this area in an effort to form a potentially bullish secondary higher bottom.

The short-term range is .7849 to .7532. Its retracement zone at .7691 to .7729 is potential resistance.

The main range is .8007 to .7532. Its retracement zone at .7770 to .7826 is the primary upside target.

Daily Swing Chart Technical Forecast

The Aussie begins the session inside a pair of retracement zones at .7604 to 7587 and .7691 to .7729. Since the main trend is up, our work suggests the direction of the AUD/USD on Friday will be determined by trader reaction to the minor 50% level at .7604.

Bullish Scenario

A sustained move over .7604 will indicate the presence of buyers. If this move creates enough upside momentum then look for the move to continue into .7677.

Taking out .7677 will indicate the buying is getting stronger with .7691 to .7729 the next likely upside target.

Bearish Scenario

A sustained move under .7604 will signal the presence of sellers. The next downside target is the minor Fibonacci level at .7587. Buyers could come in on a test of this level, but if it fails then look for an acceleration to the downside with the main bottom at .7532 the next potential downside target.

Side Notes

I have a bias to the upside, but am out of catalysts to drive the market higher. Falling Treasury yields, a softer U.S. Dollar and global equity markets hitting record highs, should have been enough to drive the Aussie sharply higher. I suspect buyers are holding back because of falling Australian Government bond yields, so we could continue to see sideways price action until yields stabilize.