The Australian Dollar is trading sharply higher late in the session on Tuesday. The currency is being boosted by a combination of factors including a weaker U.S. Dollar, increased demand for riskier assets and the release of hawkish meeting minutes from the Reserve Bank of Australia (RBA).
At 18:05 GMT, the AUD/USD is trading .6900, up 0.0087 or +1.27%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) is at $67.38, up $0.15 or +0.23%.
The U.S. Dollar is down against its Australian counterpart on Tuesday as traders reduced the odds of a percentage-point Federal Reserve rate hike later this month. Last week, traders were betting on a super-sized Fed rate hike, but some Federal Reserve officials dampened that talk.
A strong rally in the U.S. stock market is helping to boost investor sentiment as well as drive demand for the risk-sensitive Australian Dollar.
Tuesday’s rally was ignited early in the session after the RBA signaled the need for higher interest rates to tame rising inflation, despite recent rate hikes, as unemployment drops to its lowest level in nearly 50 years.
The RBA sees the current benchmark rate of 1.35 percent as being “well below” the so-called neutral rate that is neither expansionary nor contractionary, according to minutes of its July policy meeting released on Tuesday.
“The level of interest rates was still very low for an economy with a tight labor market and facing a period of higher inflation,” the RBA minutes said.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through .6964 will change the main trend to up. A move through .6682 will signal a resumption of the downtrend.
The minor trend is up. It changed to up on Monday when buyers took out .6804. It was reaffirmed when the AUD/USD rallied through .6874. Both moves support a shift in momentum.
The short-term range is .7069 to .6682. The AUD/USD is currently testing its retracement zone at .6875 to .6921.
The intermediate range is .7283 to .6682. If the main trend changes to up then look for a surge into its retracement zone at .6983 to .7053.
The minor range is .6682 to .6913. Its retracement zone at .6797 to .6770 is the nearest support.
Daily Swing Chart Technical Forecast
Trader reaction to .6875 and .6921 is likely to determine the direction of the AUD/USD into the close on Tuesday.
Holding above .6876 will put the AUD/USD in a position to challenge the Fibonacci level at .6921. Taking out this level will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the main top at .6964 the next target, followed by a retracement zone at .6983 to .7053.
A sustained move under .6876 will indicate the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the minor retracement zone at .6797 to .6770.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire