Strong Aussie Rally Through .7262 Puts .7331 on Radar

The Australian Dollar closed higher on Monday after reversing steep losses from the opening. Prices fell sharply at the onset of trading after the U.S. and Western allies ramped up efforts to punish Russia with new sanctions including cutting some of its banks off the SWIFT financial network and limiting Moscow’s ability to deploy its $360 billion foreign reserves and shuttering their airspace to Russian aircraft. Companies also reported divestment plans.

Adding to the Aussie’s early weakness, Russian President Vladimir Putin put Russia’s “deterrence forces” – which wield nuclear weapons – on high alert.

On Monday, the AUD/USD settled at .7265, up 0.0032 or +0.45%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finished at $71.97, up $0.25 or +0.35%.

At 03:30 GMT, the Reserve Bank of Australia (RBA) is expected to hold the cash rate at 0.10% on Tuesday. The latest Reuters polls shows economists now expect a rate hike in the third quarter of this year, but the Russia-Ukraine conflict may cloud this outlook.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7284 will signal a resumption of the uptrend. A move through .7314 will reaffirm the uptrend. The main trend will change to down on a trade through .7086.

The minor trend is also up. A trade through .7095 will change the minor trend to down. This will shift momentum to the downside.

The main range is .7556 to .6967. The AUD/USD is currently testing its retracement zone at .7262 to .7331.

The short-term range is .7314 to .6967. Its retracement zone at .7181 to .7140 is support.

The minor range is .6967 to .7284. Its retracement zone at .7125 to .7088 is the best support area.

Swing Chart Technical Forecast

The direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to the main 50% level at .7262.

Bullish Scenario

A sustained move over .7262 will indicate the presence of buyers. Taking out the minor top at .7284 will indicate the buying is getting stronger with the main top at .7314 the first target, followed by the main Fibonacci level at .7331.

Bearish Scenario

A sustained move under .7262 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main Fibonacci level at .7181.

If .7181 fails as support then look for a labored break with potential targets at .7140, .7125 and .7086.