AUD/USD Forex Technical Analysis – Trader Reaction to .7242 Sets the Tone

The Australian Dollar is inching higher on Wednesday after posting a choppy, two-sided trade earlier in the session. Helping to hold the currency near a two-week low is souring risk sentiment in the wake of a stock market rout and plunge in crude oil prices.

Safe-haven demand for the U.S. Dollar is also weighing on the Aussie in reaction to the tech sell-off that began last week with no apparent trigger, driving broader risk aversion.

At 07:26 GMT, the AUD/USD is trading .7223, up 0.0009 or +0.13%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on September 1.

The main trend will change to down on a trade through .7136. A move through .7414 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor trend is down. It changed to down on Tuesday when sellers took out the last swing bottom at .7222. This move confirmed the shift in momentum. A trade through .7309 will change the minor trend to up.

The short-term range is .7136 to .7414. Its retracement zone at .7242 to .7275 is new resistance. Trading on the weak side of this zone is also helping to generate the current short-term downside bias.

The major retracement zone support comes in at .7123 to .7055. This zone is controlling the near-term direction of the AUD/USD. Buyers could come in on a test of this zone in an effort to defend against a steep decline.

Daily Swing Chart Technical Forecast

The early price action suggests a short-term bottom may be forming. We’ll know a lot about the strength of the intraday rally by trader reaction to the Fibonacci level at .7242.

Aggressive counter-trend sellers could come in on the first test of .7242. Overcoming it, however, could generate the momentum needed to challenge the 50% level at .7275.

The inability to overcome .7242 will signal the presence of sellers. This could lead to a retest of today’s intraday low at .7192. A failure to hold this level could eventually extend the break into .7136 to .7123.