AUD/USD Forex Technical Analysis – Testing Major Retracement Zone at .6925 to .6876

The Australian Dollar continued to plunge on Tuesday as speculators took profits. Further driving prices lower were the bushfires that have wreaked havoc on the environment and wildlife, while driving people from their homes and increasing risks to the economy.

The attempt to manage the fires has been costly, and thus the Aussie economy has taken a hit. The tourism industry in particular has been devastated. Traders are also pricing in the possibility of a near-term rate cut by the Reserve Bank of Australia.

At 09:38 GMT, the AUD/USD is trading .6893, down 0.0050 or -0.70%.

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside. The Forex pair has closed lower every day of the new year.

A trade through .6838 will change the main trend to down, while a move through .7043 will signal a resumption of the uptrend.

The AUD/USD is currently in a position to test a number of retracement levels and potential support points.

The short-term range is .6838 to .7043. On Tuesday, it is trading on the weak side of its 50% level at .6941, making it resistance.

The intermediate range is .6754 to .7043. It is currently inside its retracement zone at .6897 to .6863.

The major range is .7082 to .6671. This zone is controlling the longer-term direction of the AUD/USD.

Daily Technical Forecast

Based on the early price action and the current price at .6893, the direction of the AUD/USD the rest of the session on Tuesday is likely to be determined by trader reaction to the 50% level at .6898.

Bearish Scenario

A sustained move under .6898 will indicate the presence of sellers. This could lead to a labored break with potential support levels at .6889, .6876 and .6863. The selling pressure will start to increase on a move through .6863.

Bullish Scenario

A sustained move over .6898 will signal the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into .6925, followed by .6941 and .6963.

Side Notes

With the trend up and the market testing a retracement zone inside .6898 to .6863 as well as an uptrending Gann angle at .6889, we could see buyers start to step in, which could lead to an intra-day short-covering rally.