AUD/USD Forex Technical Analysis – Strengthens Over .7030, Weakens Under .6967

The Australian Dollar finished higher against the U.S. Dollar on Friday as investors reacted to a mixed batch of U.S. economic data, amid new concerns over slowing activities in the non-manufacturing sector. Light short-covering and position-squaring ahead of next week’s key Reserve Bank of Australia interest rate decision also helped underpin the Aussie.

On Friday, the AUD/USD settled at .7023, up 0.0023 or +0.33%.

In the U.S., the institute for Supply Management’s non-manufacturing index declined to 55.5 percent in April, 0.6 percentage points down from 56.1 percent in March, which marks the lowest reading since August 2017, said the ISM on Friday. Analysts were looking for a reading of 57.5 percent.

Additionally, U.S. total non-farm payroll employment increased by 263,000 in April, and the unemployment rate declined to 3.6 percent, said the U.S. Bureau of Labor Statistics of Friday, pointing to a bullish labor market. However, investors decided to focus on the soft spots in the report. Traders said the modest 0.2 percent monthly pace of wage growth and the drop in the job participation rate encouraged some investors to sell the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7069 will change the main trend to up. A move through .6985 will signal a resumption of the downtrend.

Friday’s minor reversal to the upside was likely caused by short-covering and position-squaring as investors prepared for Tuesday’s RBA interest rate decision. Some traders expect the central bank to cut its benchmark interest rate by 25 basis points.

The main range is .7394 to .6764. Its retracement zone at .7079 to .7153 is resistance. It is controlling the longer-term direction of the Forex pair.

The intermediate range is .6764 to .7296. The AUD/USD is currently trading inside its retracement zone at .7030 to .6967. Buyers may be trying to form a support base. The chart indicates the market is wide open under .6967 with the possibility of s steep decline if it fails as support.

The short-term range is .7206 to .6985. Its retracement zone at .7096 to .7122 is additional resistance. It falls inside the main retracement zone.

Daily Swing Chart Technical Forecast

Based on Friday’s close at .7023, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the 50% level at .7030.

Bullish Scenario

A sustained move over .7030 will indicate the presence of buyers. If this generates enough upside momentum then look for the rally to extend into .7069 to .7079.

Bearish Scenario

A sustained move under .7030 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to extend into Friday’s low at .6985, followed closely by the Fibonacci level at .6967.

The daily chart indicates there is plenty of room to the downside with the low for the year at .6764 the next major downside target. This low was created by the freefall on January 3, which may have been a computer glitch, or an entry error.