AUD/USD Forex Technical Analysis – Likely to Plunge to .6991 if .7106 is Taken Out With Heavy Selling Volume
News of a new coronavirus variant potentially resistance to current vaccines encouraged Australian Dollar investors to seek shelter in safe-havens such as the U.S. Dollar, Japanese Yen and Swiss Franc on Friday.
Little is known of the new COVID-19 variant, detected in South Africa Botswana and Hong Kong. But scientists reckon it has an unusual combination of mutations that may make it able to evade immune responses and be more transmissible.
On Friday, the AUD/USD settled at .7122, down 0.0067 or -0.93%.
News of the new variant likely means another government shutdown of travel and perhaps areas of the country at risk. There is a lot of uncertainty surrounding the new variant and we may not know its potential impact for about two weeks. In the meantime, traders are expected to remain on edge, which means expectations of heightened volatility.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through .7113 will signal a resumption of the downtrend. A move through the August 20 main bottom at .7106 will reaffirm the downtrend.
On the upside, the first minor resistance is a 50% level at .7242, followed by a minor retracement zone at .7272 to .7310.
The fundamentals are bearish and another COVID wave would likely further delay any rate hikes by the Reserve Bank of Australia (RBA).
The down trend means traders will likely sell rallies into the retracement levels at .7242, .7272 and .7310.
Aggressive counter-trend buyers may have come in at .7113 on Friday to defend the August 20 main bottom at .7106, but we think that this is just the calm before the storm.
Taking out .7106 with a new wave of selling pressure would likely trigger an acceleration to the downside with the November 2, 2020 main bottom at .6991 the next target.