AUD/USD Forex Technical Analysis –Building Support Base or Setting Up for Further Weakness?

James Hyerczyk

The Australian Dollar closed slightly higher on Friday, but the marginal gain was actually a struggle. Although the sentiment indicator shifted to “risk on” earlier in the week as trade tensions between the United States and China eased a bit as the two economic powerhouses announced the resumption of trade talks, investors continued to be locked-in on the upcoming Reserve Bank of Australia (RBA) meeting on Tuesday.

On Friday, the AUD/USD settled at .6737, up 0.0008 or +0.12%.

Traders are pricing in a 10% chance of an RBA rate cut at this meeting, but the strong probability of future rate cuts is likely keeping a lid on the Aussie.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a trade through .7082. This is highly unlikely, but a change in the minor trend could lead to a normal 50% to 61.8% retracement of its two month range. A trade through .6677 will signal a resumption of the downtrend.

The minor trend is also down. Despite a number of minor tops, the key one to watch is .6821. A trade through this level will change the minor trend to up and this will shift momentum to the upside.

The minor range is .6677 to .6821. Its 50% level or pivot at .6749 is controlling the short-term direction of the AUD/USD.

The main range is .7082 to .6677. If the minor trend changes to up then its retracement zone at .6880 to .6927 will become the primary upside target.

Daily Swing Chart Technical Forecast

Based on Friday’s price action, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the short-term pivot at .6749.

Bullish Scenario

A sustained move over .6749 will indicate the presence of buyers. If this move creates enough upside momentum then look for buyers to take a run at the minor top at .6821. Overtaking this level could lead to test of the main 50% level at .6880.

Bearish Scenario

A sustained move under .6749 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the minor bottom at .6690 and the main bottom at .6677.

Taking out .6677 will signal a resumption of the downtrend. This could trigger an acceleration to the downside with the next major targets 2009 bottoms at .6247 and .6008.

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