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James Hyerczyk

The Australian Dollar started the week in a strong position, but sellers stopped the counter-trend rally after the Fed raised rates and hinted at another rate hike in December. The widening interest rate differential between U.S. Government bond yields and Australian Government bond yields also made the U.S. Dollar a more attractive asset. Essentially, the direction of the currency was dictated by the divergence in monetary policy between the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia.

For the week, the AUD/USD settled at .7217, down 0.0071 or -0.97%.

Weekly AUD/USD

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through .7484 will change the main trend to up. A move through .7085 will signal a resumption of the downtrend.

The minor trend is also down. Taking out .7382 will change the minor trend to up. This will also shift momentum to the upside.

The main range is .7484 to .7085. Its retracement zone at .7285 to .7332 is resistance. This zone stopped the rally at .7314 last week.

The minor range is .7085 to .7314. Its 50% level or pivot at .7200 is support. Last week’s selling stopped at .7202, just slightly above this level.

Weekly AUD/USD (Close-Up)

Weekly Technical Forecast

Based on last week’s close at .7217, the direction of the AUD/USD this week is likely to be determined by trader reaction to the pivot at .7200.

Bullish Scenario

A sustained move over .7200 will indicate the presence of counter-trend buyers. Crossing to the strong side of a short-term uptrending Gann angle at .7205 will also indicate buyers.

If this move creates enough upside momentum then look for a test of the downtrending Gann angle at .7244. Overtaking this angle will indicate the buying is getting stronger with the 50% level at .7285 the next likely target. Look for sellers on the first test of this level.

Overtaking .7285 could trigger a further rally into last week’s high at .7314, followed by a Fibonacci level at .7332, and downtrending Gann angles at .7337 and .7364.

The trigger point for an acceleration to the upside is .7364.

Bearish Scenario

A sustained move under .7200 will signal the presence of sellers. This will also put the AUD/USD on the weak side of an uptrending Gann angle at .7205. If the market breaks sharply then look for a possible test of a pair of uptrending Gann angles at .7145 and .7115. The latter is the last potential support angle before the .7085 main bottom.

Look for a break into .7004 to .6997 if .7085 fails as support. Crossing to the weak side of .6997 will put the AUD/USD in a bearish position.

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