The Australian Dollar is trading better early Tuesday, helped by increased demand for riskier assets, following yesterday’s sell-off that drove the currency to its lowest level since August 24. A rebound in crude oil is also helping to boost the commodity-linked currency.
At 07:10 GMT, the AUD/USD is trading .7270, up 0.0018 or +0.24%.
In other news, Australia’s central bank is concerned the spread of the Delta variant could slow the economy’s recovery once coronavirus lockdowns start to ease, although it still expects strong growth to resume next year.
Despite the small rebound in prices, market sentiment could turn sour once again as potential contagion from Evergrande is expected to continue to rattle investors. On Monday, Chinese regulators warned that the company’s insolvency could fuel broader risks in the country’s financial system if not stabilized.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through .7220 will signal a resumption of the downtrend. A move through .7478 will change the main trend to up, but the trend doesn’t appear to be threatened at this time.
The minor trend is also down although a new minor bottom has formed at .7220. Taking out this level will indicate the selling pressure is getting stronger. The minor trend will change to up on a move through .7347.
The short-term range is .7107 to .7478. The AUD/USD is currently testing its retracement zone at .7293 to .7249.
The minor range is .7478 to .7220. Its retracement zone at .7349 to .7379 is the next potential upside target. Since the main trend is down, sellers are likely to return on a test of this level.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to .7249.
A sustained move over .7249 will indicate the presence of buyers. The first upside target is a 50% level at .7293. With the main trend down, look for sellers on the first test of this level.
Overtaking .7293 will indicate the buying is getting stronger with the resistance cluster at .7347 to .7349 the next likely upside target.
The inability to overcome .7293 will be the first sign of weakness. If this creates enough downside momentum then look for the selling to possibly extend into .7249. Taking out this level could trigger a quick break into the minor bottom at .7220.
The daily chart indicates there is plenty of room to the downside so don’t be surprised by the start of an acceleration into the August 20 main bottom at .7107.