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James Hyerczyk

The Australian Dollar is trading higher on Wednesday, boosted by position-squaring, profit-taking and some speculative buying as traders continue to react to Tuesday’s weaker-than-expected ISM US Manufacturing PMI report. The news raised concerns over a U.S. recession, while increasing the chances of more aggressive rate cutting by the U.S. Federal Reserve. This helped weaken the U.S. Dollar, while encouraging Aussie short-sellers to adjust positions.

At 10:15 GMT, the AUD/USD is trading .6787, up 0.0025 or +0.36%.

Earlier on Wednesday, a report showed Australian GDP rose 0.5%. Traders shrugged off the report as it came in as expected. On Tuesday, the Reserve Bank of Australia left interest rates unchanged, but are widely expected to cut its benchmark rate in October.


Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside on Tuesday with the formation of a closing price reversal bottom at .6688 and its subsequent confirmation earlier today.

The main trend will change to up on a trade through .7082. This is highly unlikely, however, there is room for a normal correction into a 50% to 61.8% retracement zone. A trade through .6677 will signal a resumption of the downtrend.

The minor trend is also down. A trade through .6688 will negate the closing price reversal bottom. The minor trend will change to up on a move through .6821. This move will confirm the shift in momentum to up.

The minor range is .6677 to .6821. Its 50% level or pivot at .6759 is controlling the direction of the AUD/USD today. Trading on the strong side of this level is also helping to generate an upside bias.

The main range is .7082 to .6677. Its retracement zone at .6880 to .6927 is the primary upside target. Since the main trend is down, sellers are likely to come in on a test of this zone.


Daily Technical Forecast

Based on the early price action, the direction of the AUD/USD the rest of the session on Wednesday is likely to be determined by trader reaction to the pivot at .6749 and the downtrending Gann angle at .6752.

Bullish Scenario

The AUD/USD is also breaking out to the upside over a downtrending Gann angle that had been guiding the Forex pair lower for 33 trading sessions. This angle comes in at .6752. A sustained move over this angle will indicate the presence of buyers. If this continues to generate upside momentum then look for buyers to run stops over .6799, .6818 and .6821.

Taking out .6821 could trigger an acceleration to the upside with the next major target the main 50% level at .6880.

Bearish Scenario

A sustained move under .6749 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into minor support at .6740. This is followed by the new minor bottom at .6688 and the main bottom at .6677.

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