AUD/USD Forex Technical Analysis – Next Target .7412, but Ripe for Reversal Bottom

The Australian Dollar continued to feel pressure on Friday from the major decisions reached by the U.S. Federal Reserve on Wednesday and the European Central Bank on Thursday.

The AUD/USD settled at .7443, down 0.0034 or -0.46%.

The Fed’s decision to raise rates immediately and at least two more times before the end of the year, highlights the widening divergence between the hawkish U.S. central bank and the dovish Reserve Bank of Australia, which is unlikely to raise rates until November 2019.

Although the ECB is not likely to raise rates until July 2019 and it extended its stimulus program until December 2018, it did make moves to suggest it is getting ready to exit from quantitative easing. These moves were enough to put some fear into Australian Dollar investors.

Finally, Australia’s weaker-than-expected May Employment Change report also hurt the chances of an earlier than expected rate hike by the RBA.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. It changed to down on Thursday when sellers took out the previous main bottom at .7476. Monday’s session begins with the AUD/USD down eight sessions from its last main top. This puts it in the window of time for a potentially bullish closing price reversal bottom. This chart pattern will likely form if there is profit-taking and position-squaring.

Taking out .7448 on Friday reaffirmed the downtrend. This makes the May 9 bottom at .7412 the next likely target.

On the upside, resistance is a short-term Fibonacci level at .7513 and a short-term 50% level at .7544.

Daily Swing Chart Technical Forecast

Based on Friday’s close at .7443, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the former bottom at .7448.

A sustained move under .7448 will indicate the presence of sellers. If this continue to press the Aussie then look for the selling to extend into the next main bottom at .7412. This is a potential trigger point for an acceleration into the June 2, 2017 main bottom at .7372.

Overcoming and sustaining a move over .7448 will signal profit-taking and short-covering is taking place. If the aggressive counter-trend buying is strong enough, we could see a rally back to .7476 then .7513.