AUD/USD Forex Technical Analysis – March 22, 2016 Forecast

The AUD/USD is trading higher after Reserve Bank of Australia governor Glenn Stevens said Australia’s economy was “adjusting quite well” to lower commodity prices and had more fiscal and policy scope to respond to a global shutdown than most countries.

“The fact that Australia has a sound and credible macroeconomic policy framework, which could if needed, respond as appropriate to significant negative events is also a good starting point,” he said.

“Even with interest rates at already low levels, and public debt higher than it was, there would, in the event of a serious economic downturn, be more room to ease both monetary and fiscal policy than in many, indeed most, other countries.”

The RBA chief was speaking at a forum that had been reviewing regulatory measures in the shadow of financial turbulence in China, negative rates in Japan and Europe, plunging commodity prices led by oil and cross-current policy.

The governor was confident that despite the risks to producers and investors, the fall in the crude price was a positive overall. He also noted that his economy is coping with falling commodity prices.

“The Australian economy is adjusting quite well in the circumstances – certainly far better than in other episodes of commodity price fluctuations we have seen in history,” Mr. Stevens said. “That said, the adjustment is still a work in progress.”

Traders liked his speech because it did not mention any concerns about the Australian Dollar being overvalued, a topic that had surfaced over the week-end.

Technically, the main trend is up according to the daily swing chart. The new main top is .7680. A trade through this level will signal a resumption of the uptrend. A trade through the swing bottom at .7414 will turn the main trend to down.

The short-term range is .7414 to .7680. Its retracement zone at .7547 to .7516 is the primary downside target.

The longer-term retracement zone is .7494 to .7652. The AUD/USD is currently trading inside this zone. Trader reaction to these levels will determine the direction of the market over the long-run.

Based on Monday’s close at .7576 and the early price action, the direction of the market is likely to be determined by trader reaction to the uptrending angle at .7574. This angle acted like support earlier.

A sustained move over .7574 will indicate the presence of buyers. The first upside target is a downtrending angle at .7640, the major Fib level at .7652 and another downtrending angle at .7660. This is the last potential resistance angle before the .7680 main top.

Taking out .7680 will signal a resumption of the uptrend. This could create enough upside momentum to challenge the July 1, 2015 top at .7737.

A sustained move under .7574 will signal the presence of sellers. This could trigger a steep break into the short-term retracement zone at .7547 to .7516.

Watch the price action and read the order flow at .7574 today. Trader reaction to this angle will tell us if the bulls or the bears are in control.