AUD/USD Forex Technical Analysis – Needs to Hold .7825 Fibonacci Level to Sustain Upside Momentum

The Australian Dollar is trading nearly flat early Sunday after giving up earlier gains. Underpinning the currency is a jump in Business Confidence. Helping to cap gains is a retail sales report that came in lower than the previous month and the forecast. The weaker-than-expected U.S. Non-Farm Payrolls report that contributed to Friday’s sharp rise in the Aussie appears to be having little effect on prices.

At 03:54 GMT, the AUD/USD is trading .7844, unchanged.

Australia’s business sentiment broke new records in April in a result National Australia Bank Ltd.’s Alan Oster described as “simply stunning,” with the employment, profitability and trading indicators all surging.

Business confidence climbed to 26 points from an upwardly revised 17 in March, NAB said in a statement Monday. The conditions index – measuring hiring, sales and profits – jumped to 32 points from a revised 24.

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 inched through Friday’s high at .7862. A move through .7675 will change the main trend to down.

The main range is .8007 to .7532. The AUD/USD is currently trading on the strong side of its retracement zone at .7825 to .7769, giving the Aussie a slight upside bias. This zone is also controlling the near-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD the rest of the session on Monday is likely to be determined by trader reaction to Friday’s close at .7844.

Bullish Scenario

A sustained move over .7844 will indicate the presence of buyers. Taking out the intraday high at .78625 with conviction will indicate the buying is getting stronger.

The daily chart indicates there is plenty of room to the upside with the February 25 main top at .8007 the primary upside target. The question remains, how is the AUD/USD going to get there? Are we going to see an acceleration to the upside, or will the move be persistent? It all depends on the direction of government bond yields.

Bearish Scenario

A sustained move under .7844 will signal the presence of sellers. The first downside target is the short-term Fibonacci level at .7825. Since the main trend is up, buyers could come in on the first test of this level. If the selling is strong enough to take out the Fib level then look for a move into the 50% level at .7769.

Side Notes

A close under .7844 will form a potentially bearish closing price reversal top. If confirmed, this could lead to the start of a 2 to 3 day correction.