AUD/USD Forex Technical Analysis – Trend Down, but Ripe for Counter-Trend Reversal

The Australian Dollar is trading slightly higher early Tuesday, but inside yesterday’s range. This tends to indicate investor indecision and impending volatility. We’re probably looking at some short-covering amid easing tensions in Turkey. Traders are also digesting the series of weaker-than-expected economic reports from China.

At 0404 GMT, the AUD/USD is trading .7277, up 0.0004 or +0.07%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7256 will signal a resumption of the downtrend. The Aussie is in no position to change the trend to up, but due to the prolonged move down in terms of price and time, it is in the window of time for a closing price reversal bottom. This chart pattern will indicate the buying is greater than the selling, at least temporarily. This could lead to a 2 to 3 day correction.

A short-term range may be forming between .7453 and .7256. Its retracement zone at .7354 to .7378 is a potential upside target. Since the trend is down, sellers are likely to come in on a test of this zone.

The longer-term target is the December 23, 2016 main bottom at .7159.

Daily Technical forecast

Since today’s session begins with the AUD/USD in the window of time for a closing price reversal bottom, the key level to watch today will be yesterday’s close at .7272. We’re looking at three possible scenarios.

Firstly, buyers come in from the opening and defend .7272 all session. This could trigger weak buy stops over yesterday’s high at .7300. If this move creates enough upside momentum then look for a possible rally into the nearest downtrending Gann angle at .7333.

Secondly, sellers come in from the opening and take out .7256, triggering a resumption of the downtrend. The daily chart shows there is plenty of room to the downside with .7159 the next major target.

The third possibility is the closing price reversal bottom. In this case, sellers take out yesterday’s low at .7256 then turn higher for the session. This will indicate weak selling and strong short-covering. It could trigger a 2 to 3 day counter-trend rally with .7355 the minimum upside target.