The Australian Dollar finished sharply lower against the U.S. Dollar on Wednesday after a less-dovish than expected Federal Reserve helped make the greenback a more attractive asset. Early in the session, the Aussie was boosted by better-than-expected quarterly consumer inflation data that reduced the chances of an August 6 rate cut by the Reserve Bank of Australia.
However, these gains were erased after slightly hawkish comments from Fed Chairman Jerome Powell. Fed policymakers cut rates 25-basis points as expected, but traders were surprised when Powell failed to commit to future rate cuts. The markets had priced in additional rate cuts for September and December.
On Wednesday, the AUD/USD settled at .6847, down .0027 or -0.39%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through .6832 will reaffirm the downtrend. This could lead to an eventual test of the January 3 main bottom at .6764.
The market is in no position to change the main trend to up, but Thursday’s session begins with the AUD/USD down nine sessions from its last main top at .7082, and in a position to post a potentially bullish closing price reversal bottom.
The chart pattern won’t signal a change in trend, but if confirmed, it could lead to a 2 to 3 day counter-trend rally.
On the upside, the first resistance is a Fibonacci level at .6967.
Daily Swing Chart Technical Forecast
Based on Wednesday’s price action and the close at .6847, the direction of the AUD/USD on Thursday is likely to be determined by trader reaction to yesterday’s low at .6832.
Taking out .6832 will indicate the selling pressure is increasing. This will also reaffirm the downtrend. If it continues to generate enough downside momentum then look for a potential break into the next main bottom at .6764.
Holding above .6832 will signal the presence of buyers. Taking out this bottom then turning higher for the session will put the AUD/USD in a position to form a closing price reversal bottom. This could trigger a strong counter-trend short-covering rally.
This article was originally posted on FX Empire
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