Australian Technical Outlook: Key Levels for AUD/USD Trading
- AUD declines over 8.7%, marking a second consecutive weekly downturn
- AUD/USD poised to breach significant multi-year trend support at annual lows, as market eyes upcoming Fed meeting
- Resistance levels at 6433, 6511/27 (critical), and 6617 - Support levels at 6335, 6283, and 6200/10 (critical)
The Australian Dollar continues its descent this week, with AUD/USD experiencing another weekly decline and reaching new yearly lows. The momentum is leaning towards a potential break of long-standing trend support, which amplifies the focus on the response to the 2023 low-week close. Key levels are solidifying on the AUD/USD weekly technical chart as traders await the Federal Reserve's rate decision.
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AUD/USD Weekly Price Chart
Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView
Technical Analysis: In last month’s analysis, we highlighted that the AUD/USD correction was encountering a vital pivot area. We stated, “Any potential rallies should be curtailed below 6632 if the market is shifting lower, with a close below 6414 essential to trigger the next significant decline.” Following that, AUD briefly hit an intraday peak at 6550 before undergoing a steep decline and is now testing multi-year support levels.
Current weekly support is identified at the 2023 low-week close (LWC) at 6335. A decisive break or close below this level could pave the way for a breach of the yearly opening range and shift focus to subsequent support targets at the 88.6% retracement level of the 2022 advance at 6283, as well as the 2022 LWC / the 2008 low close at 6200/10—monitor closely for a considerable reaction at these levels.
Initial resistance is identified at the April close low of 6433, backed by the July close low and the 61.8% retracement of the October 2023 advance at 6511/27. It is noteworthy that the median line of a proposed descending pitchfork intersects this resistance zone, and a breach or close above this level would indicate that a more significant low may be forming and that the potential for a larger recovery is increasing. Following resistance is anticipated near the 52-week moving average, currently located around 6617.
Conclusion: The AUD/USD is on the verge of breaking critical multi-year support, drawing attention to the yearly lows. From a trading perspective, any upward movements should be restrained below 6433 while a close below 6335 is crucial to drive the next phase of the downtrend.
With the Federal Reserve's interest rate decision scheduled for Wednesday and crucial US inflation data set to be released on Friday, maintain flexibility leading into these announcements and keep an eye on weekly closes for directional cues. For a more in-depth assessment of short-term positions, refer to the latest analysis of the Australian Dollar.
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--- Analysis by Michael Boutros, Sr. Technical Strategist with FOREX.com
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