AUD/USD on Path to Challenge .7173 – .7125 Retracement Zone

The Australian Dollar is under pressure on Monday as hints of progress in Russian-Ukraine peace talks saw global commodity prices slip, while the U.S. Dollar continued to strengthen as investors geared up for the first of many Federal Reserve interest rate hikes later in the week.

At 08:28 GMT, the AUD/USD is trading .7248, down 0.0045 or -0.62%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $72.27, down $0.69 or -0.95%.

Investors are almost certain the U.S. Federal Reserve will start raising interest rates on Wednesday with futures traders already pricing in as many as six or seven rate hikes this year. Meanwhile, analysts are wagering the Reserve Bank of Australia (RBA) will follow a hike as early as June and have pushed bond yields sharply higher in anticipation.

Yields on Australian 10-year debt were at their highest since late 2018 at 2.42%, keeping the spread over Treasuries at a fat 38 basis points.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the closing price reversal top on March 7.

A trade through .7086 will change the main trend to down. A move through .7441 will negate the closing price reversal top and signal a resumption of the uptrend.

The main range is .7556 to .6967. The AUD/USD is currently trading on the weak side of its retracement zone at .7262 to .7331, making it resistance.

The minor trend is down. This confirmed the shift in momentum.

On the downside, the first support is a minor Fibonacci level at .7227, followed by a short-term retracement zone at .7173 to .7125.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD into the close on Monday is likely to be determined by trader reaction to .7262.

Bullish Scenario

A sustained move over .7262 will indicate the presence of buyers. If this move is able to generate enough upside momentum, we could see a short-term retest of the main Fibonacci level at .7331.

Bearish Scenario

A sustained move under .7261 will signal the presence of sellers. The first downside target is the minor Fibonacci level at .7227. This is a potential trigger point for an acceleration into the short-term 50% level at .7173, followed by the short-term Fibonacci level at .7125.