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James Hyerczyk

The AUD/USD closed higher on Friday as investors took profits and adjusted positions following a steep two-day setback. The selling pressure was essentially fueled by the widening of the interest rate differential between U.S. Government bonds and Australian Government bonds. Fueling the move in interest rates was the divergence in the monetary policies between the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia (RBA).


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7314 will change the main trend to up. A move through .7202 will indicate the selling is getting stronger. This could fuel a break into the next swing bottom at .7142.

The main range is .7085 to .7314. Its retracement zone at .7200 to .7172 is the primary downside target. Aggressive counter-trend buyers could step in on a test of this zone in an effort to form a secondary higher bottom.

If a short-term range forms between .7314 and .7202 then look for a possible rally into its retracement zone at .7258 to .7271. Since the trend is down, sellers could come in on a test of this zone.

The major retracement zone resistance is .7285 to .7332. This zone stopped the rally at .7314 on September 26.


Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at .7217, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the main 50% level at .7200.

A sustained move over .7200 will indicate the presence of buyers. If this move can create enough upside momentum, we could see a rally into the short-term retracement zone at .7258 to .7271. Look for sellers to re-emerge on a test of this zone.

Taking out .7200 and sustaining the move will signal the presence of sellers. If the selling is strong enough then look for a possible spike into the Fibonacci level at .7172. This level could attract some buyers, but it is also a trigger point for an acceleration to the downside with .7142 the next likely downside target.

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