AUD/USD Forex Technical Analysis – Short-Covering Rally Could Fuel Move into .7612 – .7659

The AUD/USD finished higher on Friday. The higher-high, higher-low helped produce a new main bottom. The Forex pair was underpinned by increased demand for commodity-linked currencies due the strength in the crude oil market, a soft U.S. consumer inflation report, which may limit the number of Fed rate hikes later this year, and technically oversold conditions fueled by the recent prolonged move down in terms of price and time.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum shifted to the upside with the formation of a closing price reversal bottom at .7412 on May 9.

The closing price reversal chart pattern doesn’t mean the trend is getting ready to change, but it could lead to a 2 to 3 rally into a short-term retracement zone.

The main range is .7812 to .7412. Its retracement zone at .7612 to .7659 is the primary upside target. Since the main trend is down, sellers are likely to re-emerge on a test of this area.

The short-term range is .7412 to .7566. Its retracement zone at .7489 to .7471 is the primary downside target.

A trade through .7566 will mean the buying is getting stronger. A move through .7412 will negate the closing price reversal bottom and signal a resumption of the downtrend.

Daily Swing Chart Technical Forecast

Based on Friday’s close at .7540 and the momentum created by the closing price reversal bottom, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to last week’s high at .7566.

A sustained move over .7566 will signal the presence of buyers. If this generates enough upside momentum, we could see the rally continue into .7612 to .7659.

The inability to overcome or sustain a move over .7566 will indicate the presence of sellers. This could trigger a pullback into .7489 to .7471. Aggressive counter-trend buyers could come in on a test of this zone in an effort to form a secondary higher bottom. This could lead to an eventual change in trend.

If .7412 fails as support then look for the selling to possibly extend into the June 2, 2017 main bottom at .7372 or the May 9, 2017 main bottom at .7329.