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James Hyerczyk

The Australian Dollar is under tremendous selling pressure on Tuesday after the Reserve Bank of Australia (RBA) kept interest rates at a record low Tuesday. Traders are worried about falling property prices, but policymakers continue to see an improving economy led by strong growth and hiring. The RBA left the cash rate at 1.5 percent as expected.

Essentially, the divergence in monetary policy between the hawkish U.S. Federal Reserve and the dovish RBA is driving the Aussie lower. This is because the widening interest rate differential between U.S. Government bonds and Australian government bonds is making the U.S. Dollar a more attractive investment.

At 1107 GMT, the AUD/USD is trading .7178, down 0.0047 or -0.65%.


Daily Technical Analysis

The main trend is down according to the daily swing chart. The next downside target is the main bottom at .7142, followed by the next main bottom at .7085. The main trend changes to up on a trade through .7314.

The main range is .7085 to .7314. The AUD/USD is currently testing its retracement zone at .7200 to .7172. Trader reaction to this zone will determine the near-term direction of the Forex pair. Aggressive counter-trend buyers are going to try to form a secondary higher bottom. Trend traders are going to try to drive through this area.


Daily Technical Forecast

Based on the early price action, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the uptrending Gann angle at .7160.

A sustained move over .7160 will indicate that buyers are stepping in to stop the price slide. Overcoming the Fib level at .7172 will indicate the short-covering is picking up. This could fuel an even stronger rally into the 50% level at .7200.

Overcoming .7200 will indicate the worst of the selling is probably over with the next target a downtrending Gann angle at .7234.

A sustained move under .7160 will signal the selling is getting stronger. The next target is the main bottom at .7142. If this fails then look for the selling to extend into the next uptrending Gann angle at .7123. This is the last potential support angle before the .7085 main bottom.

Basically, look for the downside pressure to resume on a trade through .7172. A sustained move over .7200 will likely lead to further short-covering.

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