AUD/USD Forex Technical Analysis – Trader Reaction to .7764 Pivot Sets the Early Tone

The Australian Dollar closed higher on Thursday in a volatile session, led by weaker-than-expected U.S. labor market data, sharply higher domestic bond yields and rising commodity prices.

The Aussie rose as the U.S. Dollar slipped following the release of weekly jobless claims data and other economic data. First-time filings for unemployment insurance jumped last week in a sign of continuing strife for the labor market. New claims totaled 861,000, the highest level in a month and above the Dow Jones estimate of 773,000 the Labor Department reported Thursday.

Yields on Australian 10-year bonds have surged 19 basis points this week, the biggest jump since last June, to reach an 11-month high of 1.425%.

Additionally, the Aussie was supported by rising commodity prices as China returned from holiday, with copper the highest in eight years and tin at a nine-year peak. Iron ore, Australia’s single biggest export earner, surged above $170 a tonne and is delivering a windfall to mining profit and government tax revenue.

At 03:36 GMT, the AUD/USD is trading .7763, down 0.0007 or -0.10%.

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 Tuesday and its subsequent confirmation the next session.

A trade through .7805 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through .7564. This is highly unlikely but there is room to the downside for a normal 50% to 61.8% correction.

The minor range is .7805 to .7724. The AUD/USD is currently straddling its 50% level at .7764.

The short-term range is .7820 to .7564. The AUD/USD is currently trading on the strong side of its retracement zone at .7722 to .7692.

The next short-term range is .7564 to .7805. Its 50% level at .7685 is another potential downside target.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the AUD/USD on Friday will be determined by trader reaction to .7764.

Bearish Scenario

A sustained move under .7764 will indicate the presence of sellers. If this move creates enough downside momentum then look for a break into .7724 – .7722. If the latter fails as support then look for the selling to possibly extend into .7713, followed closely by .7692.

Bullish Scenario

A sustained move over .7765 will signal the presence of buyers. If this generates enough upside momentum then look for a test of this week’s high at .7805. Taking out this level will reaffirm the main trend. This could lead to a test of the high for the year at .7820.

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