AUD/USD Forex Technical Analysis – Trend Turns Down after RBA’s Lowe Downplays Rate Hike in Near Future

The AUD/USD broke sharply lower on Thursday as buyers succumbed to dovish comments from a Reserve Bank of Australia official and the U.S. Federal Reserve’s hawkish commentary on Wednesday.

On Thursday, RBA Governor Philip Lowe appeared to play down the prospect of an Australian rate hike in the near future.

“A rise in global interest rates has no automatic implications for us here in Australia,” Lowe told an audience at the American Chamber of Commerce in Perth, noting that such a global increase in rates would only filter through to the Australian economy over the medium-longer term.

“Our flexible exchange rate through gives us considerable independence regarding the timing as to when this might happen,” says Lowe.

Lowe emphasized that an eventual withdrawal of stimulus would be contingent on the ability of highly indebted Australian households to cope with increased borrowing costs.

On Wednesday, the Federal Open Market Committee left interest rates unchanged, but also announced the central bank would begin trimming its balance sheet in October. The Fed also left open the possibility of a third rate hike in December. This news drove up U.S. Treasury yields which tightened the spread between U.S. and Australian Bonds, making the U.S. Dollar a more attractive investment.

Technically, after posting a volatile two-sided trade earlier this week, the main trend turned down again on Thursday on the trade through the last swing bottom at .7939.

This could generate the downside pressure needed to challenge the next two main bottoms at .7871 and .7866.

The main tops are .8102 and .8124, followed by the May 4, 2015 main top at .8162 and the major 50% level at .8165.

The short-term range is .7807 to .8124. Its retracement zone is .7966 to .7928. A sustained move under this zone will indicate the selling is getting stronger.

The major downside target is the retracement zone at .7847 to .7782.