AUD/USD Forex Technical Analysis – Trader Reaction to .6724 Could Set Tone TodayOften after a steep plunge like we saw on Tuesday, a market will settle into a range as traders square positions. Traders have been known to straddle the day’s pivot for several days. This price is .6724.
The Australian Dollar is trading slightly better early Wednesday after getting a beat down the previous session. The Aussie plunged to a 10-year low on speculation the Reserve Bank of Australia (RBA) could be heading into uncharted monetary policy territory.
On Tuesday, the RBA cut its benchmark cash rate by 25 basis points to a record low of 0.75 percent. The financial markets are now pricing in an additional rate cut to 0.50 percent. Once that cut is made, the door for more aggressive quantitative easing will be opened.
At 06:23 GMT, the AUD/USD is trading .6710, up 0.0006 or +0.09%.
The RBA decision wasn’t the only reason behind Tuesday’s steep break, the bottom also fell out after a U.S. report showed a steep drop in manufacturing activity. This news raised the chances of an October rate cut by the Fed, which traders believe will drive the RBA to make another rate cut.
Daily Technical Analysis
The main trend is down according to the daily swing chart. Yesterday’s sell-off took out the previous bottom at .6677, but the selling stopped at .6672. Since the AUD/USD is now trading over .6677, yesterday’s break was likely fueled by sell stops rather than aggressive shorting.
A trade through .6672 will indicate a resumption of the downtrend. The market is in no position to change the main trend to up. All bottom-pickers can hope for is a closing price reversal bottom that could temporarily stop the selling pressure.
The short-term range is .6895 to .6672. Its retracement zone at .6784 to .6810 is a potential upside target and resistance zone.
The early price action suggests today’s direction is a coin flip. If there is a short-covering rally then look for a potential move into the downtrending Gann angle at .6755. Since the trend is down, sellers could come in on a test of this level. Overtaking it could extend the rally into the 50% level at .6784.
If sellers decide to press the Aussie lower then look for a retest of .6672. Taking this level out could trigger a move into a downtrending Gann angle at .6615. Crossing to the weak side of this angle will put the AUD/USD in a bearish position.
Often after a steep plunge like we saw on Tuesday, a market will settle into a range as traders square positions. Traders have been known to straddle the day’s pivot for several days. This price is .6724.