AUD/USD Forex Technical Analysis – Trading on Bearish Side of Major Retracement Zone

The AUD/USD fell on Tuesday to its lowest level since December 21 on concerns that China, a major trading partner, may be hit by U.S. sanctions. Position-squaring ahead of Wednesday’s Fed interest rate decision, monetary policy statement and economic forecasts also weighed on the Forex pair.

Traders widely expect the central bank to raise its benchmark interest rate 25-basis points. This would be the first interest rate hike of the year. Traders will also be looking for clues that the central bank may tighten monetary policy at a faster clip later this year to prevent the economy from overheating.

As of Tuesday’s close, futures market data from the CME Group shows the chances of rates going up more than three times this year is around 40%, compared with 25% a month ago.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier this week when sellers took out the March 1 swing bottom at .7712.

The main range is .7501 to .8135. Its retracement zone is .7818 to .7743. The AUD/USD is currently trading on the weak side of this retracement zone. This is adding to the Forex pair’s downside bias.

Daily Swing Chart Technical Forecast

Based on Tuesday’s close at .7682 and yesterday’s price action, the direction of the AUD/USD today is likely to be determined by trader reaction to the previous bottom at .7712.

A sustained move under .7712 will signal the presence of sellers. If selling volume continues to increase on this move then we could see the start of a sell-off that eventually leads to a test of the December 8 main bottom at .7501.

The daily chart shows there is nothing to stop a plunge to .7501 so we could also see an acceleration to the downside if the selling pressure is strong enough.

Overcoming .7712 will indicate the selling is getting weaker. Overtaking the Fibonacci level at .7443 will indicate the short-covering is getting stronger. This could generate the upside momentum needed to challenge the 50% level at .7818.