AUD/USD Forex Technical Analysis – Strong Reversal Bottom Targets .7612 to .7659

The Australian Dollar soared on Wednesday, rebounding from earlier weakness as the dollar-crumbled, increasing demand for commodity-linked currencies. The catalyst behind the move was a recovery from a 10-month low by the Euro after reports that Italy’s biggest party would make a renewed attempt to form a coalition government and end months of political turmoil.

At 1900 GMT, the AUD/USD is trading .7576, up 0.0088 or +1.17%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum started the session trending lower.

The AUD/USD made a swift turnaround after hitting .7476, slightly above the previous main bottom at .7448. The subsequent reversal to the upside indicates that momentum may be shifting to the upside and that another higher bottom may be forming.

A trade through the last swing top at .7606 will signal a resumption of the uptrend.

Also coming into play on Wednesday was a series of retracement levels that proved to be support.

The first short-term range is .7412 to .7606. Its retracement zone at .7509 to .7486 was tested early in the session when the market fell to .7476. After recovering this zone later in the session, it became support.

The second short-term range is .7448 to .7606. Its 50% level or pivot at .7527 is also new support.

The main range is .7812 to .7412. Its retracement zone at .7612 to .7659 is the primary upside target.

Daily Swing Chart Technical Forecast

If the AUD/USD continues to hold on to its gains into the close then we’ll see the formation of a minor closing price reversal bottom. This will be a strong indication of a shift in investor sentiment. If confirmed, it should create enough upside momentum to overtake .7606 before running into initial resistance at .7612 to .7659.

If this is just a short-covering rally then the AUD/USD will eventually move back towards .7476 and probably take it out with further stops at .7448 and .7412.