AUD/USD Forex Technical Analysis – Reaction to .7931 Pivot Will Set Tone for Day

The AUD/USD finished higher on Tuesday, but the trade was mostly sideways accompanied by below average volume. Traders held the Forex pair in a range ahead of Wednesday’s release of the Australian Consumer Inflation report. Quarterly CPI is expected to come in at 0.4%, down slightly from the previously reported 0.5%.

Later in the day at 0305 GMT, Reserve Bank of Australia Governor Lowe is expected to speak on the labor market and monetary policy. Following Deputy Governor Debelle’s speech on Friday, the forward curve is almost entirely flat, so traders are saying that Lowe would need to be very dovish to drive the Australian Dollar lower.

Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7988 will take out last week’s high and signal a resumption of the uptrend.

The main trend will change to down on a trade through the last swing bottom at .7874.

The short-term range is .7988 to .7874. Its 50% level or pivot is .7931. Holding above this level will give the Aussie an upside bias. Falling below the pivot will lead to a test of the intermediate retracement zone at .7887 to .7863. Inside this zone is the main bottom at .7874.

The combination of the main bottom and the intermediate retracement zone indicates that .7887 to .7863 is the most important area on the daily chart for bullish traders.

If .7863 fails as support we could see an acceleration to the downside with the next targets .7786 to .7779. A test of this area will mean that sellers have erased the entire rally triggered last week by the hawkish RBA minutes.