AUD/USD Forex Technical Analysis – Counter-Trend Buyers Hoping for Breakout Over .6642

The Australian Dollar is trading lower on Tuesday, but remains inside last Friday’s wide range for a second day as investors continue to assess the potential economic damage from the coronavirus outbreak. The price action suggests investor indecision and impending volatility.

Due to the impact of the virus on China’s economy, the economy of its major trading partner Australia is expected to face major challenges in the near future. “Even if the virus condition start(s) to get contained and we have real activities picking up in March, it’s very difficult to see China having any material growth in the foreseeable future,” said Becky Liu, head of China macro strategy at Standard Chartered Bank.

At 10:08 GMT, the AUD/USD is trading .6601, down 0.0003 or -0.05%.

The recent price action suggests that investors are raising bets that the Reserve Bank of Australia (RBA) will make moves in the near future to stimulate the economy. Until there are real numbers to support these expectations, we could see periodic pockets of support developing like the AUD/USD has been experiencing the past two sessions.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum may be getting ready to shift to the upside after Friday’s dramatic closing price reversal bottom. Today’s U.S. consumer confidence report could be the news that changes momentum today.

The AUD/USD is in no position to change the main trend to up, but a trade through Friday’s high at .6639 could fuel further short-covering. A trade through .6586 will negate the closing price reversal bottom and signal a resumption of the downtrend.

Daily Technical Forecast

The key area to watch today is the resistance cluster formed by a downtrending Gann angle at .6634, Friday’s high at .6639 and another downtrending Gann angle at .6642.

Taking out .6639 will confirm the closing price reversal bottom, overtaking .6642 will indicate the short-covering is getting stronger and taking out .6642 could trigger an acceleration to the upside with the target a short-term retracement zone at .6668 to .6687. Since the main trend is down, sellers will likely reemerge on a test of this area.

If there is no short-covering rally then look for prices to drift lower towards last week’s multi-year low at .6586. Taking out this level could trigger another round of heavy selling pressure.