AUD/USD Forex Technical Analysis – Rising Fed Rate Hike Expections Put .6254 on Radar

The Australian Dollar is trading flat Monday after touching its lowest level since May 2020 earlier in the session. Firm U.S. Treasury yields and U.S. Dollar, along with recession fears, weighed on the currency. Volume is on the light side because of bank holidays in Japan and the United States.

At 01:12 GMT, the AUD/USD is trading .6370, up 0.0002 or +0.04%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $63.00, down $0.48 or -0.76%.

The price action suggests investors are still assessing Friday’s U.S. jobs report that showed employers hired more workers than expected in September. The news increased the odds of another supersized rate hike by the Federal Reserve at its November 1-2 meeting, making the U.S. Dollar a more attractive investment.

Traders are now positioning themselves ahead of Wednesday’s U.S. producer inflation report and Fed Minutes, Thursday’s U.S. consumer inflation report and Friday’s U.S. retail sales report. Higher than expected inflation data will put further pressure on the Fed to hike rates aggressively. This would keep a lid on the AUD/USD and could drive it sharply lower.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6343 will signal a resumption of the downtrend. A move through .6548 will change the main trend to up.

The AUD/USD is also trading on the weak side of a long-term Fibonacci level at .6464, making it resistance.

Daily Swing Chart Technical Forecast

Trader reaction to .6368 is likely to determine the direction of the AUD/USD on Monday.

Bearish Scenario

A sustained move under .6367 will indicate the presence of sellers. Taking out the intraday low at .6343 will indicate the selling pressure is getting stronger. This could trigger an acceleration to the downside with the April 21, 2020 main bottom at .6254 the next major target.

Bullish Scenario

A sustained move over .6368 will signal the presence of buyers. If this move generates enough upside momentum then look for a drive into the long-term Fibonacci level at .6464. Since the main trend is down, look for sellers to return on a test of this level.

Side Notes

A close over .6368 will form a closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend rally.