AUD/USD Forex Technical Analysis – Facing Steep Drop-off Under .7532

The AUD/USD dropped 0.30% on Friday, putting an exclamation point on an extremely bearish week. Besides a disappointing Australian Employment report, the Forex pair was driven lower by a drop in demand for higher-yielding assets and the divergence between the monetary policies of the U.S. Federal Reserve and the Reserve Bank of Australia.

Additionally, the interest rate differential between U.S. Treasury Bonds and Australian Government Bonds tightened to a 17-year low, making the Australian Dollar a less-desirable asset.

The main trend is down according to the daily swing chart. Friday’s price action suggests that momentum is still trending lower despite being down 11 sessions from the recent swing top.

A trade through .7729 will change the main trend to up. The prolonged move down in terms of price and time has put the AUD/USD in the window of time for a closing price reversal bottom, however.

The next downside target is the June 14, 2015 main bottom at .7535. This bottom is very important so we may see buyers come in to defend it. If it fails as support and the move attracts additional sellers then look out to the downside because the next major target is the June 2 bottom at .7372.

Watch the price action and read the order flow at .7532 because we could see the start of short-covering rally or a possible acceleration to the downside.

This is a holiday week in the U.S. so volume is expected to come in well below average. This can lead to a rangebound trade or volatile swings because the major banks won’t be in the market to stop the price action.