The Australian Dollar is inching higher on Tuesday after sinking to a two-year low earlier in the session. The price action reflects a turnaround in demand for higher risk assets after worries about a slowdown in China hammered commodity-linked currencies like the Aussie.

At 08:41 GMT, the AUD/USD is trading 12390.75, up 197.00 or +1.62%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.95, down $1.25 or -1.78%.

The prospects of aggressive central bank tightening, COVID-related lockdowns in China and the energy supply shock fueled by the war between Ukraine and Russia has led to a downward revision in the outlook for the global economy, hitting the AUD/USD hard.

As a result, these factors are causing heightened volatility in the markets and weighing on the commodity-heavy Aussie which is often used as a proxy for global growth and the Chinese Yuan.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6911 will signal a resumption of the downtrend. A move through .7266 will change the main trend to up.

The minor range is .7266 to .6911. Its retracement zone at .7089 to .7130 is the nearest upside target and potential resistance area.

Daily Swing Chart Technical Forecast

Trader reaction to .6948 will likely determine the direction of the AUD/USD on Tuesday.

Bullish Scenario

A sustained move over .6948 will indicate the presence of buyers. Taking out the intraday high at .6986 will indicate the short-covering rally is getting stronger.

Taking out the intraday high at .6986 could create the upside momentum needed to trigger a surge into the .7089 – .7089 minor retracement zone. Since the main trend is down, look for sellers on the first test of this area.

Bearish Scenario

A sustained move under .6948 will signal the return of sellers. This could lead to a retest of the intraday low at .6911. Meanwhile, a failure to hold this level could trigger another acceleration to the downside with the June 30, 2020 main bottom at .6833 the next target.

Side Notes

A close over .6948 will form a closing price reversal bottom. If confirmed, this could trigger the start of a minimum 2-day countertrend rally with .7089 the first objective.

Additionally, the early price action suggests, investors may be recognizing value inside a pair of two-year bottoms at .6963 and .6921 based on today’s early price action.

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

This article was originally posted on FX Empire

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