AUD/USD Forex Technical Analysis – Rising Yields, Trade Under .7732 Fueling Early Bearish Tone

The Australian Dollar is trading slightly better early Monday, but off its high. Despite Friday’s late session rebound rally, there was no follow-through rally. A stronger U.S. Dollar is weighing on the Aussie. The greenback was underpinned by higher U.S. Treasury yields. Sparking the rise in yields and the subsequent sell-off in the bond market was the U.S. Senate’s passage of a massive stimulus bill.

At 07:15 GMT, the AUD/USD is trading .7687, up 0.0006 or +-.07%.

The Senate passed a $1.9 trillion COVID-19 relief plan, a day after a stunning U.S. jobs report sent the greenback to its highest level since November 2020.

The yield on the benchmark U.S. 10-year Treasuries hovered near one-year highs on Monday, while U.S. NASDAQ futures fell about 1% and European stock index futures pared gains as the selloff also spread to other risk assets.

The AUD/USD is going to have a hard time rallying without the help of lower Treasury yields and higher demand for riskier assets like stocks.

It’s not too early to start preparing for the March 17 Federal Reserve monetary policy decisions. That being said, don’t be surprised if we see some short-covering and counter-trend buying this week as speculators position themselves ahead of the Fed’s announcements.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7622 will signal a resumption of the downtrend with .7564 the next potential downside target.

A trade through .8007 will change the main trend to up. This is not likely, but the AUD/USD is down seven days from its last main top, which puts it in a position to form a potentially bullish closing price reversal bottom.

The main range is .7564 to .8007. The AUD/USD is currently trading on the weak side of its retracement zone at .7733 to .7786. This zone is controlling the near-term direction of the Forex pair. This area is also new resistance.

The minor range is .8007 to .7622. If there is a short-covering rally then its retracement zone at .7815 to .7860 will become the primary upside target. Since the main trend is down, sellers could come in on a test of this area.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD will be determined by trader reaction to the main Fibonacci level at .7733.

Bearish Scenario

A sustained move under .7732 will indicate the presence of sellers. The first downside target is a minor pivot at .7676. This is followed by last week’s low at .7622.

Bullish Scenario

A sustained move over .7733 will signal the presence of buyers. If this move can create enough upside momentum then look for the rally to possibly extend into a pair of 50% levels at .7785 and .7815.