AUD/USD Forex Technical Analysis – Rebounded from 18-Month Low Last Week, But Still Bearish

The Australian Dollar finished lower against the U.S. Dollar last week, but did mount a serious comeback on the daily charts late in the week. The Aussie finished higher on Thursday and Friday, recovering after hitting an 18-month low against the Greenback on Wednesday.

The AUD/USD settled at .7407, down 0.0034 or -0.45%.

The price action essentially reflected a shift in investor sentiment with appetite for risky assets like equities increasing. The Australian Dollar also found buying support in Asia following a stronger-than-expected Chinese Yuan fix from the People’s Bank of China (PBOC).

Throughout the week, the Aussie was unusually sensitive to movement in the Yuan, which could have been because of heightened anxiety over the escalating trade war between the United States and China.

Despite the short-covering rally at the end of the week, the long-term outlook for the AUD/USD remains bearish due to the divergence in the monetary policies of the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia.

The previous week, the RBA Monetary Policy Meeting Minutes presented a dovish outlook for the Australian economy with investors pricing in the next rate hike for November 2019 or later.

Weekly Swing Chart Technical Analysis

The main trend is down according to the weekly swing chart. Last week, sellers reaffirmed the downtrend when they took out the .7329 main bottom from May 9, 2017. This drove the AUD/USD to .7326, its lowest level since the week-ending January 13, 2017.

The main trend will change to up on a move through .7677. A trade through .7326 will signal a resumption of the downtrend with the next major target the December 23, 2016 main bottom at .7159.

The short-term range is .7677 to .7326. Its 50% level or pivot is .7502. This is followed by a major Fibonacci level at .7532.

Weekly Swing Chart Technical Forecast

Taking out last week’s high at .7444 and the prior week’s high at .7458 will indicate the short-covering is getting stronger. This is likely to occur if appetite for risk continues to increase. If the rally picks up enough traction, we could see a move into .7502 to .7532. Since the main trend is down, sellers are likely to come in on a test of this zone.

The inability to sustain a rally over .7444 to .7458 will indicate the presence of sellers. If this move generates enough downside momentum then look for retest of .7329 to .7326.

Taking out .7326 will signal a resumption of the downtrend. This could also trigger an acceleration to the downside with the near-term target coming in at .7159.