U.S. Markets close in 5 hrs 15 mins

AUD/USD Forex Technical Analysis – August 6, 2019 Forecast

James Hyerczyk

The Australian Dollar is edging slightly higher early Tuesday after yesterday’s steep sell-off drove the currency to a 10-year low. Helping to drive the Aussie lower was a plunge in bond yields to a record low. Traders also adjusted their positions to reflect increased chances of sooner-than-expected rate cuts by the Reserve Bank of Australia (RBA).

At 22:54 GMT, the AUD/USD is trading .6764, up 0.0007 or +0.12%.

The catalyst behind the selling pressure is an escalation of the trade dispute between the United States and China. After President Trump announced additional tariffs on China on August 1, it retaliated early Monday by allowing its currency to break the 7 yuan to the dollar level. This was designed to increase demand for Chinese goods. Additionally, Bloomberg News reported that China suspended U.S. agricultural product purchases in response to Trump’s new tariffs.

Daily AUD/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6748 will signal a resumption of the downtrend. The next major target is the March 3, 2009 main bottom at .6285.

The main trend will change to up on a trade through .7082. This is highly unlikely, however, regaining the former bottom at .6764 will indicate the presence of enough buyers to trigger a short-covering rally. Profit-taking will also cause this move.

We’re also going to be watching for a lower-low, higher-close, especially because of the prolonged move down in terms of price and time.

Daily Technical Forecast

The early price action suggests that the direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to the former bottom at .6764.

If the AUD/USD takes out Monday’s low at .6748 then the direction will be determined by trader reaction to yesterday’s close at .6757.

Bearish Scenario

A sustained move under .6764 will indicate the presence of sellers. Crossing to the weak side of .6757 will indicate the selling is getting strong. Taking out .6748 could trigger an acceleration to the downside.

Bullish Scenario

A sustained move over .6764 will signal the presence of buyers. If this is able to generate enough upside momentum then buyers will try to take out yesterday’s high at .6804. If successful, this will make .6748 a new minor bottom. The next upside target is a downtrending Gann angle at .6842. This angle has been guiding the AUD/USD lower since July 19.

Taking out .6748 then turning higher for the session will put the AUD/USD in a position to post a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.

This article was originally posted on FX Empire

More From FXEMPIRE: