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AUD/USD Forex Technical Analysis – After Sideways Trade, Downtrend Ready to Resume

James Hyerczyk
Updated

The AUD/USD finished sharply lower on Friday as progress on U.S. tax reforms raised prospects of a fiscal lift to the economy, boosting expectations for several Fed rate hikes next year and driving up demand for risky assets.

Senate approval of a budget blueprint late Thursday cleared a critical hurdle for Republicans to pursue a tax-cut package without Democratic support.

The U.S. Dollar was also supported throughout the week by hawkish comments from Fed Chair Janet Yellen and other policymakers that suggest the central bank is moving forward with another rate hike before the end of the year.

Essentially, the force driving the AUD/USD lower is the divergence in monetary policy between the U.S. Federal Reserve and the Reserve Bank of Australia. This is helping to tighten the spread between U.S. Government bonds and Australian Government bonds.

AUDUSD
Daily AUDUSD

Daily Swing Chart Analysis

You can see from the lower tops and lower bottoms, the main trend is down according to the daily swing chart.

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The recent rally from .7733 to .7897 was not a trend change but a shift in momentum to the upside. The market is now trading at .7914.

After four sideways trading sessions, the AUD/USD appears ready to resume the downtrend. A trade through .7807 will make .7897 a new main top. This will also indicate that momentum is shifting back to the downside. A trade through .7733 will signal a resumption of the downtrend.

The main range is .8102 to .7733. Its retracement zone at .7918 to .7961 is resistance.

The major long-term retracement zone is .7848 to .7782. Inside this zone is the .7815 to .7796 short-term retracement zone. These zone are provided support all week.

Although we’re likely to see a downside bias, we’re likely to see a sideways trade if the AUD/USD remains inside .7848 to .7782.

The AUD/USD will begin to open up to the downside if .7822 is taken out with conviction.

Looking at both directions, look for an upside bias on a sustained move over the 50% level at .7848 and for a downside bias on a sustained move under the 61.8% level at .7782.

This article was originally posted on FX Empire

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