AUD/USD Forex Technical Analysis – RBA to Set the Tone; Strengthens Over .7551, Weakens Under .7531

The Australian Dollar is trading higher early Tuesday as investors look ahead to the Reserve Banks (RBA) interest rate decision at 04:30 GMT.

According to Reuters, the RBA will hand down one of its most anticipated decisions and it could have a significant impact on the short-term direction of the Australian Dollar. Market expectations for the meeting intensified after the RBA said Governor Philip Lowe would hold a news conference after the decision, as he did when the RBA unveiled yield curve control in March 2020.

At 02:20 GMT, the AUD/USD is trading .7554, up 0.0025 or +0.33%.

All 27 respondents in the latest Reuters poll believe the RBA will not extend the three-year yield target beyond the April 2024 bond maturity and the majority believes the RBA will adopt a flexible approach to its quantitative easing program, due to end in September.

The RBA has repeatedly indicated the cash rate will not move before 2024. The market is split on whether the tweaking of the bond-buying program will be a hawkish shift that opens the door to and earlier move. The dovish view is the RBA will push back against calls from major banks predicting the first rate hike as early as Q4 2022, according to Reuters.

If the RBA statement repeats their view that conditions for a rate rise are “unlikely to be until 2024 at the earliest”, it will indicate a continued dovish bias. The statement and Lowe‘s press conference may emphasize the uncertain economic outlook due to an increase in coronavirus infections and Australia’s slow vaccine rollout. That would dampen expectations of an earlier rate rise, John Noonan, a Reuters market analyst wrote.

The main trend is down according to the daily swing chart, but momentum has shifted to the upside with the confirmation of Fridays closing price reversal bottom.

A trade through .7617 will change the main trend to down. A move through .7445 will signal a resumption of the downtrend.

If the RBA sounds hawkish, traders will go after the main top at .7617. If the RBA sounds dovish then look for a possible retest of Fridays main bottom at .7445.

The major support is the long-term retracement zone at .7499 to .7379. This zone stopped the selling at .7477 on June 21 and at .7445 on July 2.

The minor range is .7617 to .7445. The AUD/USD is currently testing its retracement zone at .7531 to .7551.

The short-term range is .7776 to .7445. Its retracement zone at .7611 to .7650 is another potential upside target.

The main range is .7891 to .7445. If the main trend changes to up then look for the buying to possibly extend into its retracement zone at .7668 to .7721.

The best near-term upside target is a resistance cluster at .7650 to .7668.

The direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to .7551 and .7531.

Bullish Scenario

A sustained move over .7551 will indicate the presence of buyers. If this move is able to create enough upside momentum then look for the buying to possibly extend into .7611 – .7617. Taking out the main top at .7617 could trigger a further move into .7650 – .7668.

Bearish Scenario

A sustained move under .7531 will signal the presence of sellers. This could trigger a break into .7499. If this level fails to hold then look for the selling to possibly extend into .7445.