James Hyerczyk
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The Australian Dollar finished lower on Friday as a drop in demand for higher risk currencies weighed on the currency. For most of the session, risk sentiment was driven by worries over the spread of coronavirus as investors expressed doubts on expectations about a V-shaped recovery for the world’s largest economy.

On Friday, the AUD/USD settled at .6861, down 0.0026 or -0.38%.

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Later in the day, the focus shifted on deteriorating U.S.-China trade relations after the U.S. Senate unanimously passed a new bill that places sanctions on Chinese officials and businesses who undermine Hong Kong’s autonomy from Beijing.

Meanwhile, Chinese officials recently expressed “strong dissatisfaction” with U.S. sanctions that came in response to a new national security bill on Hong Kong, warning that crossing “red lines” and meddling in what China considers its own internal affairs could put the trade deal at risk, The Wall Street Journal first reported on Friday.

According to Forbes, “Although the phase one trade deal is still alive on paper, if the United States continues to pressure China over “sensitive issues” that it considers off limits – such as Hong Kong, Taiwan and other matters – then the latter could halt its purchases of certain American exports.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6975 and .6977 will put the AUD/USD in a position to challenge additional main tops at .7065 and .7082.

A trade through .6811 will change the main trend to down. This is followed by another main bottom at .6800.

The combination of pairs of lower tops and lower bottoms suggests investor indecision and impending volatility. To put it bluntly, a major move is just around the corner. I’m leaning to the downside because the chances of COVID-19 getting worse are increasing every day. Demand for liquidity and the U.S. Dollar could weigh heavily on the Aussie over the near-term.

The short-term range is .7065 to .6800. Its 50% level at .6933 is resistance.

The minor range is .6506 to .7065. Its 50% level at .6785 is support.

The main range is .6402 to .7065. Its retracement zone at .6733 to .6655 is the major support. It is controlling the near-term direction of the Forex pair.


Short-term Outlook

At the onset of the week, the chart pattern is fairly simple. If enough counter-trend buyers support the AUD/USD then look for them to make another run at .6933.

If the counter-trend traders take control then look for a labored break into .6811, .6785 and .6800. The selling will open up under .6800 and even more if .6733 fails. The trigger point for an even steeper decline is .6655.

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