AUD/USD Forex Technical Analysis – Mixed Trade with Market Split on Size of RBA Rate Hike

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The Australian Dollar is inching higher on Monday, helped by a slight improvement in risk sentiment as traders adjusted positions ahead of this week’s Reserve Bank (RBA) meeting.

The Aussie is being supported as Asian shares joined U.S. stock futures in making cautious gains on Monday. Chinese blue chips climbed 1.3% after a survey confirmed service sector activity shrunk in May, but the Caixin index still improved to 41.4 from 36.2.

Sentiment was also aided by comments from U.S. Commerce Secretary Gina Raimondo that President Joe Biden has asked his team to look at the option of lifting some tariffs on China.

At 10:24 GMT, the AUD/USD is trading .7223, up 0.0015 or +0.20%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $71.40, down $0.56 or -0.78%.

Traders Still Debating Size of RBA Hike

According to reports, investors are divided on whether Australia’s central bank will hike interest rates by a “usual” quarter point this week or opt for something more dramatic.

As far as the size of the next move in the AUD/USD, much depends on whether the Reserve Bank of Australia (RBA) chooses to raise the 0.35% cash rate by 25 basis points or more at the policy meeting on Tuesday.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending higher following the confirmation of Friday’s closing price reversal top.

A trade through .7283 will negate the chart pattern and signal a resumption of the uptrend. A move through .6829 will change the main trend to down.

The minor trend is also up. A trade through .7141 will change the minor trend to down. This will confirm the shift in momentum.

The main range is .7661 to .6829. Its retracement zone at .7245 to .7343 is resistance. This area stopped the buying on Friday at .7283.

The intermediate range is .7458 to .6829. The market is currently testing its retracement zone at .7218 to .7143.

The short-term range is .6829 to .7283. If the minor trend changes to down then its retracement zone at .7056 to .7002 will become the next downside target area.

Daily Swing Chart Technical Forecast

Trader reaction to .7217 is likely to determine the direction of the AUD/USD on Monday.

Bullish Scenario

A sustained move over .7218 will indicate the presence of buyers with .7245 the next target. Overtaking this level will indicate the buying is getting stronger with the minor top at .7283 the objective.

Bearish Scenario

A sustained move under .7217 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the support cluster at .7143 – .7141.