James Hyerczyk
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The Australian Dollar is trading higher on Monday as it rebounded against the U.S. Dollar, as a sell-off last week in global bonds on worries about eventual monetary policy tightening appeared to have eased for now.

While a steep plunge in global bonds set-off a near-panic sell in the Australian Dollar last week, the Reserve Bank of Australia (RBA) waded into its domestic bond market with more than US$2 billion of unscheduled purchases. The move seems to have helped put in a short-term low.

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At 08:33 GMT, the AUD/USD is trading .7743, up 0.0040 or +0.51%.

While the RBA response appears to have calmed bond investors and eased the selling pressure in the Australian Dollar, the apparent divide between traders and central banks over the pace of the economic recovery is likely to continue to be the source of short-term volatility.

The Reserve Bank of Australia will hold its monthly policy meeting on Tuesday, and markets are widely expecting it to reinforce its forward guidance for three more years of near-zero rates, while also addressing the market dislocation.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Friday. A move through .7692 will signal a resumption of the downtrend. The main trend will change to up on a trade through .8007.

The short-term range is .7564 to .8007. The AUD/USD is currently straddling its retracement zone at .7786 to .7733. This area is controlling the near-term direction of the Aussie Dollar.

The minor range is .8007 to .7692. Its retracement zone at .7850 to .7887 is the primary upside target. Trader reaction to a test of this area will determine whether the Aussie moves higher or forms a potentially bearish secondary lower top.


Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Monday is likely to be determined by trader reaction to the short-term Fibonacci level at .7733.

Bullish Scenario

A sustained move over .7733 will indicate the presence of buyers. This could trigger a rally into the short-term 50% level at .7786. This price is a potential trigger point for an acceleration to the upside with .7850 to .7887 the next likely upside target.

Bearish Scenario

A sustained move under .7733 will signal the presence of sellers. The first downside target is last week’s low at .7692. This is a potential trigger point for an acceleration to the downside with the next major target the February 2 main bottom at .7564.

For a look at all of today’s economic events, check out our economic calendar.

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