AUD/USD Forex Technical Analysis – Buyers Targeting .7245 – .7343 Retracement Zone

The Australian Dollar is edging higher early Monday on low volume as most of the major players sit on the sidelines ahead of the U.S. Memorial Day holiday. The move suggests investors are ready to extend the current two-week rally as they continue to trim long U.S. Dollar positions ahead of a week filed with major domestic and U.S. reports.

At 04:46 GMT, the AUD/USD is trading .7178, up 0.0017 or +0.23%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.89, up $0.64 or +0.91%.

Australian futures are priced for the Reserve Bank of Australia (RBA) to hike by a quarter-point in both June and July, and by 50 basis points (bps) in August following inflation data for the second quarter which are likely to be red hot.

A raft of domestic data out this week should keep that tightening on track, even though gross domestic product on Wednesday is forecast to show growth of just 0.7% for the first quarter, after a huge 3.4% jump the previous quarter.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7266 will reaffirm the main trend. A move through .6829 will change the main trend to down.

The minor trend is also up. A trade through .7035 will change the minor trend to down. This will shift the momentum.

On the upside, the nearest resistance is .7218. The next is the main retracement zone at .7245 to .7343.

On the downside, the nearest support is .7143. The next is the short-term retracement zone at .7099 to .7047.

Daily Swing Chart Technical Forecast

Trader reaction to .7161 is likely to determine the direction of the AUD/USD on Monday.

Bullish Scenario

A sustained move over .7161 will indicate the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into .7218 to .7245.

Bearish Scenario

A sustained move under .7161 will signal the presence of sellers. The first downside target is .7143. If this fails then look for the move to possibly extend into .7099.

Side Notes

Due to the prolonged move up in terms of price and time, a close under .7161 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.