AUD/USD Forex Technical Analysis – Trader Reaction to .7175 Sets the Tone after RBA, Budget Announcements

The Australian Dollar is inching higher late in the session on Monday ahead of the Reserve Bank of Australia’s (RBA) policy meeting and Australian government budget announcement. The Aussie is being underpinned by a weaker U.S. Dollar as risk appetite improved on optimism that lawmakers in Washington will reach a deal for new stimulus to blunt the economic impact of the coronavirus.

At 18:27 GMT, the AUD/USD is trading .7175, up 0.0011 or +0.16%.

Economists are split on whether the RBA will cut the cash rate from 0.25 percent on Tuesday, hours before the federal budget is released. This usually means policymakers will leave it unchanged. Last week, Westpac economists changed their opinion and are now expected a rate cut to 0.10 percent in November.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through .7006 will signal a resumption of the downtrend. The main trend will change to up on a move through .7345.

The minor trend is up. This is controlling the momentum. A trade through .7209 will reaffirm the uptrend. The minor trend will change to down on a move through .7131.

The upside target is a retracement zone at .7210 to .7258. Trader reaction to this zone could determine the near-term direction of the AUD/USD.

The downside target is the retracement zone at .7095 to .7020. This zone could be controlling the longer-term direction of the AUD/USD.

The minor range is .7345 to .7006. The AUD/USD is currently straddling its 50% level at .7175.

Short-Term Outlook

Based on the price action the last three sessions, the direction of the AUD/USD on Monday/Tuesday is likely to be determined by trader reaction to the 50% level at .7175.

Bullish Scenario

A sustained move over .7175 will indicate the presence of buyers. This could lead to a labored rally due to a series of resistance levels including a minor top at .7209, a 50% level at .7210 and a Fibonacci level at .7258. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .7175 will signal the presence of sellers. The first downside target is the minor bottom at .7131, followed by the main 50% level at .7095. If this level fails then look for a potential acceleration to the downside with the main Fibonacci level at .7020 the best target, followed by the main bottom at .7006.

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