AUD/USD Forex Technical Analysis – Trader Reaction to .7966 Will Set the Tone for the Week

The Australian Dollar posted a volatile two-sided trade last week before turning lower into the close. The Forex pair was supported early in the week by an upbeat assessment of the economy by the Reserve Bank of Australia, however, they continued to signal a neutral stance on interest rates.

The AUD/USD settled the week at .7959, down 0.0041 or -0.51%.

The U.S. Federal Reserve drove the U.S. Dollar higher when it announced its plan to begin trimming its $4.5 trillion balance sheet in October. Federal Open Market Committee members also left open the possibility of a third rate hike in December.

The AUSD/USD closed at a balance point on the weekly chart. The direction is likely to be determined by whether speculators believe the RBA is wrong about the timing of the next rate hike, or whether the odds of a Fed rate hike are increasing.

Weekly Technical Analysis

The main trend is up according to the weekly swing chart. A trade through .8124 will signal a resumption of the uptrend. This could generate the upside momentum needed to challenge a main top at .8162 and a major 50% level at .8165. A move through .7807 will change the weekly trend to down.

The short-term range is .7807 to .8124. Its retracement zone is .7966 to .7928. The AUD/USD straddled this zone last week and settled inside it. This indicates investor indecision and impending volatility. It could also mean the Forex pair is going through a transition period from bullish to bearish.

The main range is .7329 to .8124. If the main trend changes to down then its retracement zone at .7726 to .7633 will become the primary downside target.

Weekly Forecast

Based on last week’s close at .7959, the direction of the AUD/USD is likely to be determined by trader reaction to the short-term 50% level at .7966.

A sustained move over .7966 will signal the presence of buyers. If this move gains traction we could see a retest of .8124 then .8162 to .8165.

A sustained move under .7966 will indicate the presence of sellers. The first target is the short-term Fibonacci level at .7928. This price is the trigger point for an acceleration into .7807. Taking out this main bottom will change the main trend to down and likely fuel an extension into at least .7726.