AUD/USD Forex Technical Analysis – Watch for Technical Bounce on Test of .7847 to .7782

The AUD/USD broke sharply lower on Tuesday as investors responded to U.S. Federal Reserve Chair Janet Yellen’s slightly hawkish tone on interest rates. In an afternoon speech, Yellen acknowledged the central bank’s struggles to forecast one of its key policy objectives, but also added that the central bank needs to continue gradual rate hikes despite broad uncertainty about the path of inflation.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The trend was reaffirmed on Tuesday when sellers took out the closing price reversal bottom at .7908. The selling was also strong enough to penetrate main bottoms at .7871 and .7866.

If the selling pressure continues then the next potential downside target becomes the August 15 main bottom at .7807. This is followed by a minor bottom at .7786 that could be the trigger point for an acceleration to the downside. The daily chart indicates there is plenty of room under this level with the next major target coming in at .7571.

The short-term range is .7807 to .8124. Its retracement zone at .7928 to .7966 is new resistance.

The main range is .7571 to .8124. Its retracement zone at .7847 to .7782 is the primary downside target. This zone is controlling the longer-term direction of the market.

We could see a technical bounce on the first test of .7847 to .7782. We may even see some aggressive counter-trend buying, profit-taking or short-covering. However, if it fails as support, we could see an acceleration to the downside if .7782 is taken out with conviction.

The first test will be how investors respond to the major 50% level at .7847. If there is no bounce on a test of this key level then look for the selling to extend into at least .7807 to .7782.

The steep sell-off has also put the AUD/USD in the window of time for a potentially bullish closing price reversal bottom. They usually occur inside major retracement zones.