AUD/USD Forex Technical Analysis – Approaching Major Retracement Zone at .7936 to .7966

The AUD/USD is rebounding from an earlier loss, reaching its highest level since August 8. The catalysts behind the recovery are political turmoil in Washington, and the release of mixed FOMC meeting minutes.

The Forex pair was under pressure early in the session on increased bets the Fed would raise rates at least one more time in 2017. The U.S. Dollar was also being supported by increased demand for higher-yielding assets after the crisis between the United States and North Korea was abated at least for now.

The AUD/USD started to bottom after President Trump tweeted that he would disband his advisory councils filled with leaders of corporate giants. The buying got stronger with the Australian Dollar hitting its session high after the minutes from the Federal Reserve’s July meeting showed a split between FOMC members who wanted to stay the course and continue to raise rates and those who preferred the Fed slow down the process.

Policymakers did agree, however, that the process of reducing the Fed’s balance sheet should begin “relatively soon.” Some members argued that there needs to be a more detailed plan worked out.

Technical Analysis

The main trend is down according to the daily swing chart, but momentum is starting to shift to the upside. A trade through .7807 will signal a resumption of the downtrend.

The short-term range is .8065 to .7807. Its retracement zone at .7936 to .7966 is the primary upside target. Taking out this zone will turn momentum to the upside.

The test of .7936 to .7966 is very important because it will determine the direction of the next major move. Trend traders are going to try to stop the rally on a test of this zone in an effort to form a potentially bearish secondary lower top.

Buyers are going to try to take out the retracement zone as they try to make .7807 and new main bottom and secondary higher bottom.

Additional resistance is a downtrending angle at .7925. If the retracement zone is taken out, the rally may extend into the next downtrending angle at .7995.