AUD/USD Forex Technical Analysis – Profit-Taking Ahead of Weekend, Fueling Short-Covering Rally

The Australian Dollar is rebounding against the U.S. Dollar on Friday after touching a nearly two-year low the previous session. Nonetheless, the Aussie is still in a position to finish the week with a steep loss as growth forecasts for China were downgraded and the Yuan extended its decline.

At 06:38 GMT, the AUD/USD is trading .6887, up 0.0033 or +0.48%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $67.89, down $0.80 or -1.17%.

One reason for the weakness was China’s decision to limit unnecessary travel outside the country by its citizens, part of a drastic COVID-19 response that has hammered prices for industrial commodities.

In response to the prolonged lockdowns in China, JPMorgan this week slashed its China growth forecasts and now sees GDP contracting by an annualized 1.5% in the current quarter. It also warned data on retail sales and industrial production due on Monday would show hefty falls.

Meanwhile, the gloomy outlook has caused a month-long decline in the Yuan and encouraged investors to sell the Aussie as a liquid proxy.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6829 will signal a resumption of the downtrend, while a move through the June 22, 2020 main bottom will reaffirm the trend. Taking out the main top at .7266 will change the main trend to up.

The minor trend is also down. A trade through .7053 will change the minor trend to up. This will shift momentum to the upside.

The minor range is .7053 to .6829. Its pivot at .6941 is the first upside target.

Another minor range is .7266 to .6829. Its retracement zone at .7048 to .7099 is another potential upside target.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Friday is likely to be determined by trader reaction to .6891.

Bearish Scenario

A sustained move under .6891 will indicate the presence of sellers. If this creates enough downside momentum then look for a retest of .6829.

Taking out .6829 will indicate the selling pressure is getting stronger with the next potential targets .6811 and .6777.

Bullish Scenario

A sustained move over .6891 will signal the presence of counter-trend buyers. If this generates enough upside momentum then look for a surge into the minor pivot at .6941. This is a potential trigger point for an acceleration into .7048.