AUD/USD Direction Controlled by .7120 – .7148 Retracement Zone

The Australian Dollar is trading lower late Friday, hovering just above a multi-month low reached earlier in the week on May 2. A drop in risk sentiment weighed on the currency amid increased global recession fears. Sellers were also reacting to expectations the Federal Reserve will tighten monetary policy faster than peers to stem runaway inflation.

At 20:00 GMT, the AUD/USD is trading .7069, down 0.0044 or -0.62%. The Invesco Currency Shares Australian Dollar Trust settled at $70.25, down $0.25 or -0.35%.

In U.S. economic news, the economy added 428,000 jobs in April, which was slightly more than the 400,000 expected by the Dow Jones. The unemployment rate was expected to fall to 3.5%, but stood at 3.6%.

Also helping to pressure the AUD/USD was a jump in U.S. Treasury yields. The yield on the benchmark 10-year Treasury note hit 3.146% earlier in the session.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7266 will change the main trend to down. A move through .7030 will signal a resumption of the downtrend.

The first minor range is .7030 to .7266. The AUD/USD is currently trading on the weak side of its retracement zone at .7120 to .7148, making it resistance.

Short-Term Outlook

The direction of the AUD/USD into the close on Friday will be determined by trader reaction to .7120 – .7148.

Look for the downside bias to continue on a sustained move under .7120 with .7030 the next key target. Taking out this level could trigger an acceleration into the low of the year at .6867, followed closely by the July 16, 2020 main bottom at .6963.

An upside bias could develop on a sustained move over .7148. If this move is able to generate enough upside momentum then look for a strong short-covering rally with the next potential targets a 50% level at .7244, a main top at .7266 and a Fibonacci level at .7295.