James Hyerczyk
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The Australian Dollar is likely to finish lower for the week, but Friday’s price action has been impressive enough to put the currency in a position to close higher for the session. It could just be end of the week profit-taking driving the price action, or end of the month position-squaring, but the Aussie did come back from early session weakness fueled by a weak Private Capital Expenditure report so there could be an aggressive counter-trend buyer in there defending the recent low at .6690 and the low for the month at .6677.

At 20:12 GMT, the AUD/USD is trading .6735, up 0.0006 or +0.09%.

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Monday is a U.S. bank holiday so I suspect both profit-taking and position-squaring fueled the price action on Friday. Short-covering ahead of next week’s Reserve Bank of Australia (RBA) interest rate decision could also be influencing the price action. The RBA is expected to leave rates unchanged.


Daily Technical Analysis

The main trend is down according to the daily swing chart. After the RBA rate decision in early August, the AUD/USD just drifted in a narrow range. The main trend will change to up on a trade through .7082. This is highly unlikely. A move through .6677 will trigger a resumption of the downtrend.

The minor range is also down. A trade through .6821 will change the minor trend to up. This will also shift momentum to the upside.

The minor range is .6677 to .6821. Its 50% level or pivot at .6749 has been controlling the direction of the AUD/USD all month.

The main range is .7082 to .6677. If the minor trend changes to up then look for the rally to extend into its retracement zone at .6880 to .6927.


Short-Term Forecast

It’s going to take several steps to get the AUD/USD moving to the upside. First buyers are going to have to establish support on the strong side of .6749. Then buyers are going to have to take out the downtrending Gann angle at .6782 today. Finally, there is going to have to be enough buying to trigger a breakout through the minor top at .6821.

If sellers continue to defend .6749 then the next break could take out .6690 then .6677. The daily chart is wide open to the downside under .6677 with the next major target the March 3, 2009 bottom at .6285.

With so much downside potential, it’s no wonder buyers are defending .6677. On the other hand, short-sellers may not want to sell weakness either at current price levels.

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