AUD/USD Forex Technical Analysis – Inside ‘Window of Time’ for Closing Price Reversal Top

The Australian Dollar is edging lower early Monday after touching its highest level since December 2018 early in the session. The move was follow-through buying tied to last Friday’s strong surge that was fueled by an announcement signaling a more accommodative U.S. Federal Reserve.

On Thursday, Fed Chair Jerome Powell’s speech at the Jackson Hole Monetary Policy Symposium signaled the U.S. central bank would seek to keep inflation at 2%, on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation above 2% for some time.

At 05:21 GMT, the AUD/USD is trading .7349, down 0.0016 or -0.22%. This is down from a session high of .7381.

The Aussie may have also been pressured by a report that showed China’s factory activity expanded at a slower pace in August, according to the official Purchasing Managers’ Index (PMI). The official manufacturing PMI fell slightly to 51 in August from 51.1 in July, but remained above the 50-point mark that separates growth from contraction on a monthly basis. Analysts had expected it to pick up slightly to 51.2.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier in the session when buyers took out Friday’s high at .7366.

A trade through .7136 will change the main trend to down. This is highly unlikely, but the early price action suggests momentum may be getting ready to shift to the downside.

The new minor range is .7136 to .7381. If momentum shifts to the downside then look for the selling pressure to possibly extend into its retracement zone at .7258 to .7230.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at .7349, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to Friday’s close at .7365.

Bullish Scenario

A sustained move over .7365 will indicate the presence of buyers. We saw that move earlier in the session. Taking out the intraday high at .7381 will indicate the buying is getting stronger with the next target the December 3, 2018 main top at .7394.

The main top at .7394 is a potential trigger point for an acceleration to the upside with the next major target the July 9, 2018 main top at .7484.

Bearish Scenario

A sustained move under .7365 will signal the presence of sellers. Since the AUD/USD is up seven sessions from its last main bottom, it is now inside the window of time for a potentially bearish closing reversal top.

A close under .7365 will form a closing price reversal top. If confirmed on Tuesday then we could see the start of a 2 to 3 day correction with .7258 to .7230 the next major downside target.

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