Risk Sentiment Lifting AUD/USD toward Multi-Month Tops

The risk sensitive Australian Dollar is trading higher on Wednesday on optimism some progress was being made toward a deal to resolve the conflict between Russia and Ukraine. While the news helped lift risk sentiment, it also put pressure on energy prices, which could limit gains in the Aussie.

At 06:04 GMT, the AUD/USD is trading .7532, up 0.0024 or +0.32%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $74.40, up $0.12 or +0.16%.

Little Market Fanfare Following Australia’s Budget Release

In other news, the release of Australia’s annual budget was a non-event with traders showing little reaction as its deficit and economic projections were well within expectations. However, the budget did include a lot of extra spending and tax cuts front-loaded to this year and next, likely with an eye to elections due by May.

“This adds to demand at a time when the economy is already strong,” noted Hayden Dimes, a markets economist at ANZ. “When the RBA starts to hike, we expect it to move with some vigor and the cash rate to reach 2% by the end of 2023.”

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside on Tuesday following the confirmation of Monday’s closing price reversal top.

A trade through .7540 will negate the chart pattern and signal a resumption of the uptrend. The main trend will change to down on a trade through the nearest main bottom at .7165.

The minor trend is also up. A trade through .7456 will change the minor trend to down. This will confirm the change in momentum.

The minor range is .7540 to .7456. The AUD/USD is currently trading on the strong side of its pivot at .7498, making it new support.

The short-term range is .7165 to .7540. If the minor trend changes to down then we could see a pullback into its retracement zone at .7352 to .7308.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to .7498.

Bullish Scenario

A sustained move over .7498 will indicate the presence of buyers. If the move creates enough upside momentum then look for a surge into .7540.

Taking out .7540 will indicate the buying is getting stronger with the October 28, 2021 main top at .7556 the next target. Taking out this level could trigger an acceleration into a pair of main tops at .7599 – .7617.

Bearish Scenario

A sustained move under .7498 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the minor bottom at .7456. This is a potential trigger point for an acceleration to the downside with .7352 to .7308 the primary downside target area.