AUD/USD Forex Technical Analysis – Short-Covering Relief Rally as Investors Defend Key Support at .7222

The Australian Dollar is edging higher early Wednesday after recovering from an earlier setback. The turnaround in the Aussie corresponded with the decision by the Reserve Bank of New Zealand (RBNZ) to leave interest rates unchanged at a record low of 0.25%.

At 02:34 GMT, the AUD/USD is trading .7262, up 0.0008 or +0.12%. This is up from a low of .7238.

The Aussie is trying to rebound from Tuesday’s steep loss which was fueled by dovish comments from Australia’s central bank. According to the minutes from the Reserve Bank of Australia’s (RBA) August 3 meeting, policy makers would be prepared to take policy action should coronavirus lockdowns across the country threaten a deeper economic setback.

The selling pressure suggests investors are betting on further stimulus as the Delta variant spreads.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .7238 will reaffirm the downtrend.

The main trend will change to up on a move through .7427. This is highly unlikely, but due to the prolonged move down from the last main top, it is currently inside the window of time for a closing price reversal bottom.

A closing price reversal bottom won’t change the main trend to up, but if confirmed, it could shift momentum to the upside for about 2 or 3 days.

The minor trend is also down. A trade through .7389 will change the minor trend to up. This will also shift momentum to the upside.

The nearest resistance is a long-term Fibonacci level at .7379. The nearest support is the November 13, 2020 main bottom at .7222.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to .7254.

Bearish Scenario

A sustained move under .7254 will indicate the presence of sellers. The first downside target is .7238. Taking out this level will indicate the selling is getting stronger with .7222 the next downside target.

The main bottom at .7222 is a potential trigger point for a steep break. The daily chart indicates there is plenty of room to the downside with the November 2, 2020 main bottom at .6991 the next major target price.

Bullish Scenario

A sustained move over .7254 will signal the presence of buyers. If this move generates enough upside momentum, the Aussie could extend the rally into a minor pivot at .7333.

A close over .7254 will form a closing price reversal bottom on the daily chart. If confirmed, the AUD/USD could post a 2-3 day counter-trend rally.