The AUDUSD's gains are being capped amid rising risk aversion, as stringent virus curbs in China triggered clashes in many cities, including Beijing.
The Australian Dollar is edging higher against its U.S. counterpart early Tuesday after sinking the previous session on concerns about unrest over COVID-19 restrictions in China and hawkish comments from a prominent Federal Reserve official.
At 01:48 GMT, the AUDUSD is trading .6666, up 0.0013 or 0.20%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $65.80, down $0.96 or -1.44%.
The Aussie’s gains are being capped amid rising risk aversion, as stringent virus curbs in China triggered clashes in many cities, including Beijing.
The Australian currency was also pressured by a stronger US Dollar, which rebounded on Monday after St. Louis Fed President James Bullard said the Federal Reserve needs to raise interest rates quite a bit further and then hold them there throughout next year and into 2024 to gain control of inflation and bring it back down toward the U.S. central bank’s 2% goal.
The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through .6585 will change the main trend to down. A move through .6798 will reaffirm the uptrend.
The nearest support is a short-term Fibonacci level at .6631. Following this level is a short-term 50% level at .6543 and a longer-term Fibonacci level at .6466.
On the upside, the nearest resistance is a pivot at .6692, followed by a long-term 50% level at .6760.
Trader reaction to .6631 is likely to determine the direction of the AUD/USD on Tuesday.
A sustained move over .6631 will indicate the presence of buyers. This could trigger a surge into the pivot at .6692. Overtaking this level will indicate the buying is getting stronger with the nearest resistance clustering around .6760 to .6798.
A sustained move under .6631 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to extend into the main bottom at .6585.
A trade through .6585 will change the main trend to down. This could trigger an acceleration into the retracement zone at .6543 to .6466.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.