AUD/USD Forex Technical Analysis – Testing Major Retracement Zone at .7847 to .7782

The Australian Dollar continued to weaken as bullish U.S. Dollar traders pinned their hopes on U.S. tax reform and higher interest rates in December.

On Wednesday, U.S. President Trump proposed the biggest U.S. tax overhaul in three decades. Better-than-expected U.S. Core Durable Goods also helped support the dollar. This pointed to underlying economic strength which could support Fed Chair Janet Yellen’s case for a rate hike before the end of the year.

Daily Technical Analysis

The main trend is down according to the daily swing chart. Support continued to erode when sellers decisively drove the AUD/USD through a pair of former bottoms at .7871 and .7866. The next major bottom comes in at .7807.

On Friday, the AUD/USD will be down seven days from the last swing top at .8102. This will put it in the window of time for a possible closing price reversal bottom. With the Forex pair currently testing a major retracement zone at .7847 to .7782 and sitting slightly above the main bottom at .7807, aggressive counter-trend traders should start looking for signs of a bottom.

If there is a reversal bottom or a counter-trend short-covering rally, gains are likely to be limited by the retracement zone at .7928 to .7965. This type of move typically last 2 to 3 days.

So the plan the longs continue to liquidate their positions then somewhere inside .7847 to .7782 within the next day or two to start watching for a closing price reversal bottom or some other sign that we’ve hit a bottom and that the selling pressure is slowing and the buying pressure is building.

Keep in mind that we are looking for a counter-trend move. These are often fast-moving and don’t last very long, perhaps 2 to 3 days.