AUD/USD Forex Technical Analysis – Strengthens Over .7107, Weakens Under .7090

The Australian Dollar finished higher on Friday after rebounding from an earlier multi-year low. The reversal by the Aussie was tied to the U.S. GDP report which showed the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, missing expectations after it increased 1.6 percent in the third quarter.

The core PCE price index rose at a 2.1 percent pace in the April-June period. Weak inflation data may cause the Fed to pause the pace of its planned interest rate hikes, which would make the U.S. Dollar a less-desirable asset.

On Friday, the AUD/USD settled at .7087, up 0.0008 or +0.12%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7160 will change the main trend to up.

On Friday, after a prolonged move down in terms of price and time, the AUD/USD posted a potentially bullish closing price reversal bottom. If confirmed, this chart pattern could trigger the start of a 2 to 3 day retracement. A trade through .7020 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The minor trend is also down. A trade through .7107 will change the minor trend to up. This will also shift momentum to the upside.

The short-term range is .7160 to .7020. Its retracement zone at .7090 to .7107 is the first upside target. This zone was tested on Friday. It is controlling the near-term direction of the market.

The main range is .7314 to .7020. If the main trend changes to up then its retracement zone at .7167 to .7202 will become the primary upside target.

Daily Swing Chart Technical Forecast

Based on Friday’s close at .7087, the direction of the AUD/USD early Monday is likely to be determined by trader reaction to the short-term 50% level at .7090.

A sustained move under .7090 will indicate the presence of sellers. If this attracts enough downside momentum then look for a minimum pullback into a short-term pivot at .7062, followed by .7020. Taking out .7020 is likely to lead to a test of the February 9, 2016 main bottom at .6973.

A sustained move over .7090 will signal the presence of buyers. This should lead to a quick rally into the short-term Fibonacci level at .7107.

The Fib level is the trigger point for a potentially bullish breakout. The daily chart indicates there is plenty of room to the upside with the first target the main top at .7160, followed by the main retracement zone at .7167 to .7208.

Basically, look for the AUD/USD to strengthen on a sustained move over .7107 and for the AUD/USD to weaken on a sustained move under .7090.