AUD/USD Forex Technical Analysis – Key Level to Watch All Week is .7889

The AUD/USD closed lower for a second consecutive week, driven by overbought technical conditions, a dovish central bank and risk aversion that encouraged investors to sell higher-yielding assets.

Increased tension between the United States and North Korea weighed on the Aussie last week, but the market attracted buyers on Friday in reaction to disappointing U.S. Consumer Inflation data which reduced the odds of a U.S. Federal Reserve rate hike later this year.

We could see a two-sided trade this week due to the fundamentals. If the U.S. Dollar weakens because of lower U.S. Treasury yields and weaker inflation, then the AUD/USD is likely to firm.

Escalating tension between the U.S. and North Korea and a sell-off in the stock market could put pressure on the AUD/USD due to the liquidation of higher-yielding assets.

Technical Analysis

We’re going to take a look at the weekly chart for Monday. The main trend is up according to the weekly swing chart. A trade through .8065 will signal a resumption of the uptrend. If the buying is strong enough, we could see a move into a resistance price cluster at .8162 to .8165.

The main range is .7329 to .8065. If the selling pressure continues then its retracement zone at .7697 to .7610 will become the primary downside target.

The new short-term range is .8065 to .7838. Its 50% level or pivot is .7952. Look for a downside bias on the weekly chart as long as the market remains under this pivot.

Forecast

Based on last week’s close at .7890 and last week’s price action, the direction of the AUD/USD this week is likely to be determined by trader reaction to the uptrending angle at .7889.

A sustained move over .7889 will indicate the presence of buyers. This could lead to a labored rally due to a number of possible resistance levels.

The first upside target is a major downtrending angle at .7914. Crossing to the bullish side of this angle will indicate the presence of buyers.

The next potential upside targets are a series of angles and retracement levels at .7945, .7952, .8005 and .8035. The latter is the last potential resistance angle before the .8065 main top.

If the uptrending angle at .7889 fails as support then look for the selling pressure to increase. The first target is last week’s low at .7838.

The trigger point for a possible acceleration to the downside is .7838. Taking out this level with increased selling pressure could lead to an eventual test of the major 50% level at .7697.

Based on the weekly chart, look for an upside bias this week on a sustained move over .7952 and a downside bias on a sustained move under the uptrending angle at .7889.