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AUD/USD Forex Technical Analysis – Reaction to Retracement Zone at .7397 to .7376 Will Determine Next Major Move

James Hyerczyk

The Australian Dollar is trading slightly better early Thursday after posting a steep plunge the previous session. The Aussie was pressured on Wednesday on two fronts, lingering concerns over an escalation of the trade dispute between the United States and China after the U.S. released a list of additional tariffs on Beijing, and better-than-expected U.S. producer inflation data.

On Wednesday, the AUD/USD settled at .7367, down 0.0093 or -1.27%. At 0156 GMT, the Australian/U.S. Dollar is trading .7371, up 0.0004 or +0.06%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7484 will change the main trend to up. A move through .7310 will signal a resumption of the downtrend.

The minor trend is also down. It turned down early Thursday when sellers took out the previous minor bottom at .7361.

The short-term range is .7310 to .7484. The Aussie is currently testing its retracement zone at .7397 to .7376. This zone is very important to the structure of the chart pattern. It is controlling the short-term direction of the Forex pair. Aggressive counter-trend buyers are going to try to form a secondary higher bottom. This could eventually lead to a change in the main trend to up. Trend traders are going to try to drive the Forex pair through this zone in an effort to increase the importance of the main top at .7484.

The main range is .7677 to .7310. If there is change in trend to up then look for a test of its retracement zone at .7494 to .7537. Sellers could return on a test of this zone.

Daily Swing Chart Forecast

Based on the early price action on Thursday, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the short-term Fibonacci level at .7377.

A sustained move under .7377 will indicate the presence of sellers. A sustained move under the previous minor bottom at .7361 will indicate the selling is getting stronger. This could create the downside momentum needed to challenge the July 2 main bottom at .7310.

Taking out .7310 will signal a resumption of the downtrend. If this move generates enough downside momentum then look for the selling to eventually extend into the December 23, 2016 main bottom at .7159.

A sustained move over .7377 will signal the return of buyers. This could lead to a quick test of the short-term 50% level at .7397. This price is a potential trigger point for an acceleration to the upside.

Essentially, the key to the next move in the AUD/USD is trader reaction to the short-term retracement zone at .7397 to .7376. Look for an upside bias to develop on a sustained move over .7397 and for the downside bias to continue on a sustained move under .7376.

This article was originally posted on FX Empire