AUD/USD Testing Potential Trigger Point for Upside Breakout

The Australian Dollar is edging higher on Wednesday, helped by an increase in demand for higher-yielding assets, as investors become less worried about the risk of Russia invading Ukraine although the threat still exists.

Risk sentiment rose on Tuesday after Russia said it would withdraw some troops from Ukraine’s border. This risk-on tone continued through the Asian session on Wednesday, even though U.S. President Joe Biden warned that more than 150,000 Russian troops were still in a “threatening position”.

At 11:49 GMT, the AUD/USD is trading .7175, up 0.0023 or +0.32%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.63, down $0.01 or -0.02%.

The minutes from the Fed’s January meeting will be released later today at 19:00 GMT. Traders are expecting a hawkish tone with long-standing expectations that the U.S. Federal Reserve will raise rates starting in March.

Financial market traders are pricing in a 59.5% chance of a 50 basis points hike at the Fed’s next meeting on March 16 and a 40.5% chance of a 25 bps hike.

Meanwhile, Australian Dollar speculators are betting on a hike as early as June given how inflationary pressures are building across the globe. Markets are fully prices for the 0.1% cash rate to rise to 0.25% in June, and to reach 1.25% by Christmas.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7249 will signal a resumption of the uptrend. A move through .7086 will change the main trend to down.

The short-term range is .7314 to .6967. The AUD/USD is currently testing the upper level of its retracement zone at .7140 to .7181.

The minor range is .6967 to .7249. Its retracement zone at .7108 to .7075 is support. This zone stopped the selling at .7086 on February 14.

The main retracement zone target is .7262 to .7331.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to .7181.

Bullish Scenario

A sustained move over .7182 will indicate the presence of buyers. This is a potential trigger point for an acceleration to the upside with .7249 – .7262 the next major upside target.

Bearish Scenario

A sustained move under .7180 will signal the presence of sellers. This could lead to a labored break with .7140 the first target, followed by .7108. This is the last potential support level before the .7086 main bottom.