AUD/USD Forex Technical Analysis – Trapped Inside Retracement Zone: Strengthens Over .7207, Weakens Under .7163

The Australian Dollar is trading slightly higher early Wednesday with the market posting an inside move. This tends to indicate investor indecision and impending volatility.

Earlier today, the MI Leading Index came in at -0.1%, up from 0.1%. This news generated almost no reaction. This is because traders are primarily focused on Wednesday’s U.S. Federal Reserve interest rate and monetary policy decisions.

More importantly, investors want to see what the future holds for future rate hikes. Furthermore, early Thursday, Australia is scheduled to release its latest data on Employment Change and Unemployment Rate.

At 0638 GMT, the AUD/USD is trading .7193, up 0.0008 or +0.11%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7151 will signal a resumption of the downtrend. The main trend will change to up on a move through the last main top at .7247.

The main range is .7020 to .7394. The AUD/USD is currently trading inside its retracement zone at .7207 to .7163. This zone is controlling the near-term direction of the Forex pair.

The short-term range is .7394 to .7151. If the main trend changes to up then its retracement zone at .7273 to .7301 will become the primary upside target.

Daily Swing Chart Technical Forecast

With the main trend down and based on the earlier price action, the direction of the AUD/USD is likely to be determined by trader reaction to the Fibonacci level at .7163.

Bullish Scenario

A sustained move over .7163 will indicate the presence of buyers. The first upside target is the 50% level at .7207. Since the main trend is down, we could see sellers on the first test of this level. Overtaking it, however, could trigger a surge with .7247 the next likely target.

Taking out .7247 will change the main trend to up. This could extend the rally into .7273 to .7301.

Bearish Scenario

The inability to sustain a rally over .7207 will be the first sign of weakness. Taking out .7163 will signal that the selling is getting stronger. This could lead to a test of .7151.

The daily chart is wide open under .7151 so if the selling pressure begins to increase under this level, we could see an acceleration to the downside with .7020 the next major target.

Basically, look for an upside bias to develop on a sustained move over .7207, and for the downside bias to resume on a sustained move under .7163.