AUD/USD Set Up for Plunge into November 2020 Low

The Australian Dollar is trading at its lowest level since December 7 on Thursday, after Federal Reserve chair Jerome Powell surprised investors by leaving the door open to larger and faster than expected interest rate hikes.

Powell told reporters after the Fed concluded a two-day meeting on Wednesday that board members were of a mind to begin hiking in March to tame runaway inflation. During his post-Fed meeting press conference, Powell stressed that no decisions had been taken, but answering a question about whether the central bank would consider a 50-basis point hike, he replied without ruling it out.

At 07:49 GMT, the AUD/USD is trading .7073, down 0.0044 or -0.61%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.59, down $0.43 or -0.61%.

The Fed’s aggressive tone only added to market speculation the Reserve Bank of Australia (RBA) will have to follow with hikes of its own, with a move to 0.25% fully priced in by May and rates near 1.25% by year end.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .7063 will reaffirm the downtrend. A move through .7277 will change the main trend to up.

The short-term range is .6993 to .7314. The AUD/USD is trading on the weak side of its retracement zone at .7116 to .7154, making it resistance.

 Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Thursday will be determined by trader reaction to the short-term Fibonacci level at .7116.

Bearish Scenario

A sustained move under .7116 will indicate the presence of sellers. Taking out .7063 will indicate the selling is getting stronger. This could lead to an acceleration to the downside, if the selling volume increases, with the support cluster at .6993 – .6991 the primary downside target.

Bullish Scenario

Overcoming and sustaining a move over .7116 will signal the return of buyers although the rally is likely to be fueled by short-covering rather than new buying. If the price action generates enough upside momentum then look for an initial surge into a 50% level at .7154.

Side Notes

As long as the AUD/USD remains under .7116 to .7154, the way of least resistance will be down with the November 2, 2020 main bottom at .6991 the next likely target.