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AUD/USD Forex Technical Analysis – Hawkish Fed Could Drive Aussie into .6791 to .6767

James Hyerczyk

The Australian Dollar is trading lower on Wednesday after failing to follow-through to the upside following yesterday’s dramatic rebound rally. The currency is currently trading inside Tuesday’s range, which suggests investor indecision and impending volatility.

With the Aussie nearly unchanged for the week, the price action indicates general uncertainty for the currency after yesterday’s dovish minutes from the Reserve Bank of Australia (RBA) opened the door to another interest rate cut. Meanwhile, investors await the release of the latest interest rate and monetary policy decisions from the U.S. Federal Reserve at 18:00 GMT.

The Fed is widely expected to cut its benchmark interest rate by 25 basis points. However, investors are more interested in policymaker thoughts on future rate cuts –possibly in October or December.

At 07:24 GMT, the AUD/USD is trading .6839, down 0.0028 or -0.40%.

Daily AUD/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart. The new main top is .6895. A trade through this top will change the main trend to up. A move through .6688 will signal a resumption of the downtrend.

The minor trend is also down. A trade through .6848 will change the minor trend to down. It changed to down on Tuesday when sellers took out .6848.

The main range is .7082 to .6677. Its retracement zone at .6880 to .6927. This zone is resistance. It stopped the rally last week at .6895. This zone is controlling the near-term direction of the AUD/USD.

The short-term range is .6688 to .6895. Its retracement zone at .6791 to .6767 is the primary downside target. Buyers might come in on a test of this level in an effort to form a secondary higher bottom.

Daily Technical Forecast

Based on the early price action and the current price at .6839, the direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to the downtrending Gann angle at .6652.

Bearish Scenario

A sustained move under .6652 will indicate the presence of sellers. If this move creates enough downside pressure then look for an eventual break into the uptrending Gann angle at .6798. This is followed closely by the short-term 50% level at .6791.

Bullish Scenario

A sustained move over .6652 will signal the presence of buyers. This could trigger a rally into the main 50% level at .6880. Overtaking this level could lead to a test of the main top at .6895. This is followed closely by an uptrending Gann angle at .6909. Overtaking this angle will put the AUD/USD in a strong position.

Overview

Look for a two-sided reaction with the release of the Fed announcements at 18:00 GMT. The first reaction will be to the rate cut, which should be tame since it has been known for weeks. The second will be to the monetary policy statements and any comments. Dovish comments will be supportive. Hawkish comments should drive the AUD/USD lower. Putting an October or December rate cut on hold would be an example of a hawkish comment.

This article was originally posted on FX Empire

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