AUD/USD Forex Technical Analysis – Trading on Weak Side of .7222 Makes Aussie Vulnerable to Steep Plunge

The Australian Dollar is trading lower early Thursday despite better-than-expected labor market data. Meanwhile risk adverse investors continue to move money into the safe-haven U.S. Dollar on rising concerns the surge in COVID-19 cases will derail the global economic recovery.

At 02:11 GMT, the AUD/USD is trading .7217, down 0.0020 or -0.27%.

Although Australia’s unemployment rate unexpectedly dropped in July to a 12-year low, the drop was largely due to people falling out of the labor force as coronavirus lockdowns limited their ability to look for work.

The Australian Bureau of Statistics (ABS) emphasized the data should not be viewed as a sign of strength in the labor market noting the number of unemployed fell sharply mainly due to the restrictions of lockdowns.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier in the session when sellers took out the November 13, 2020 main bottom at .7222. A trade through the intraday low at .7212 will signal a resumption of the selling pressure.

A trade through .7427 will change the main trend to up. This is highly unlikely, however, the AUD/USD is down 11 sessions from its last main top, which puts it inside the window of time for a closing price reversal bottom.

A closing price reversal bottom won’t change the main trend to down, but if confirmed, it could trigger the start of a minimum 2 to 3 day counter-trend rally.

On the upside, the nearest resistance is the long-term Fibonacci level at .7379.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Thursday is likely to be determined by trader reaction to .7236.

Bearish Scenario

A sustained move under .7236 will indicate the presence of sellers. This could trigger a move into the intraday low at .7212.

The daily chart indicates there is plenty of room to the downside under the November 13, 2020 main bottom at .7222. The next major target is the November 2, 2020 main bottom at .6991. We could see an acceleration to the downside for a few days or a short-term trend down to this price.

Bullish Scenario

A sustained move over .7236 will signal the presence of counter-trend buyers. The first upside target will be a minor pivot at .7319. Since the main trend is down, look for sellers on the first test of this level.

Overtaking .7319 will indicate the buying is getting stronger. If this can create enough upside momentum then look for the rally to possibly extend into the Fibonacci level at .7379.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire