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James Hyerczyk

After showing signs of strength early in the session on the back of solid Chinese Gross Domestic Product (GDP) data, the Australian Dollar reversed to the downside to finish lower for the session. Stronger-than-expected U.S. housing data drove Treasury yields higher, making the greenback a more attractive asset. This weighed on the Aussie into the close.

On Friday, the AUD/USD settled at .6872, down 0.0024 or -0.35%.

Also contributing to the weakness were concerns over the impact of the bushfires on the Australian economy and continued worries about a possible rate cut by the Reserve Bank of Australia (RBA). Position-squaring ahead of this week’s Australian employment reports also pressured the Aussie.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6877 on Friday turned the main trend down. A move through .6934 will change the main trend to up.

The main range is .7082 to .6671. Its retracement zone at .6876 to .6925 is controlling the longer-term direction of the AUD/USD.

The short-term range is .6671 to .7032. Its retracement zone at .6851 to .6809 is the next downside target and potential support area.


Daily Swing Chart Technical Forecast

Based on Friday’s close at .6872, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the main 50% level at .6876.

Bearish Scenario

A sustained move under .6876 will indicate the presence of sellers. This could trigger a break into a possible support cluster at .6851 to .6849.

Taking out .6849 will indicate the selling is getting stronger. This could lead to a test of the next main bottom at .6838. This is the last potential support before the short-term Fibonacci level at .6808, followed by the next main bottom at .6800.

A trade through .6800 will reaffirm the downtrend, setting up a further decline into the next main bottom at .6754.

Bullish Scenario

A sustained move over .6876 will signal the presence of buyers. The first upside target is a minor 50% level at .6902.

Overtaking .6902 could trigger a further rally into the main Fibonacci level at .6925, followed by the main top at .6934. The latter is the trigger point for an acceleration to the upside.

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