AUD/USD Forex Technical Analysis – Testing May Retracement Zone at .7936 to .7966

A weaker U.S. Dollar helped drive up demand for the higher-yielding Australian Dollar on Monday, making the currency a more attractive investment. The dollar fell as U.S. Treasury yields weakened, tightening the spread between U.S. Government Bonds and Australian Government Bonds.

U.S. Treasury yields continued to be pressured by trader reaction to Fed Chair Janet Yellen’s dovishly perceived speech on Friday at the central bankers’ symposium at Jackson Hole, Wyoming.

In her speech, Yellen stayed on script, talking about how safe the financial system had become due to the action of the central banks. Yellen did not talk about monetary policy which led investors to believe she had nothing new to say about the timing of the next interest rate hike.

Technical Analysis

The main trend turned up on Monday according to the daily swing chart when the AUD/USD crossed the previous main top at .7962. However, there wasn’t much of a follow-through move and the rally stalled at .7973. If buying volume increases then this could generate enough upside momentum to challenge the next main top at .8065.

The main trend will turn down on a move through .7866 with .7807 the next likely target.

The main range is .8065 to .7807. Its retracement zone at .7936 to .7966 is currently being tested. Holding above the Fibonacci or upper level of the range will indicate the buying is getting stronger. A break back below the 50% level will give the market a downside bias.

On Monday, the AUD/USD crossed to the strong side of a downtrending angle at .7955, but closed under the Fibonacci level at .7966. In order to sustain the rally and the upside momentum, buyers are going to have to hold the market above the downtrending angle. In order to trigger an acceleration to the upside, buyers are going to have to sustain a rally over .7966.

Falling back below the angle at .7955 will signal that upside momentum is slowing. A failure to hold .7936 will indicate sellers are retaking control.