AUD/USD Forex Technical Analysis – Testing Major Retracement Zone on Weekly ChartsThe direction of the AUD/USD this week is likely to be determined by trader reaction to the major 50% level at .6822.
The Australian Dollar surged last week, finishing higher for a third consecutive week. The primary driver of the rally has been increasing demand for risky or higher-yielding assets including commodity-related currencies.
Investors are also shedding safe-have assets like gold, U.S. Treasurys and the U.S. Dollar on expectations that markets have witnessed the worst of the coronavirus’ carnage on the global economy.
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Last week, the AUD/USD settled at .6966, up 0.0298 or +4.46%.
According to Bloomberg, “The Aussie jumped as much as 0.9% on Friday to 70.04 U.S. cents, the highest level since early January when the virus outbreak had yet to explode into a pandemic. It has risen 27% after sliding to a near 18-year low in March, and is seen as a favored asset to buy among investors cheering the re-opening of economies from Singapore to Germany.
“The Aussie is on a tear, and with markets undergoing a massive reappraisal of risk, it’s hard to rule out the currency rallying even more,” said Janu Chan, senior economist at St. George Bank Ltd. in Sydney. “The currency is one of the easiest ways for investors to express their risk sentiment, and Australia’s containment of the virus, the RBA’s refraining from going down the path of negative interest rates are certainly helping.”
Weekly Technical Analysis
The main trend is up according to the weekly swing chart. The weekly trend turned up last week when buyers took out the last swing top at .6685 from the week-ending March 13. A move through the next swing top at .7032 from the week-ending January 3 will be a further confirmation of the uptrend.
The main trend will change to down on a move through .5510. This is highly unlikely, but there is room to the downside for a normal correction. Furthermore, the prolonged move up in terms of price and time makes the AUD/USD vulnerable to a closing price reversal top. This chart pattern may not change the main trend to down, but it could trigger a two to three-week pullback.
The main range is formed by the .8135 main top from the week-ending January 26, 2018 to the main bottom at .5510 from the week-ending March 20. The AUD/USD is currently trading inside its retracement zone at .6822 to .7132. This zone is likely controlling the longer-term direction of the AUD/USD.
A downtrending Gann angle at .6895 also passes through this zone. Trader reaction to this angle will also influence the near-term direction of the Forex pair.
Weekly Technical Forecast
Based on last week’s price action and close at .6966, the direction of the AUD/USD this week is likely to be determined by trader reaction to the major 50% level at .6822.
A sustained move over .6822 will indicate the presence of buyers. Holding above the downtrending Gann angle at .6895 will indicate the buying is getting stronger. If this generates enough upside momentum then look for breakouts over the next two main tops at .7032 and .7082 into the major Fibonacci level at .7132. This is also a potential trigger point for an acceleration to the upside.
A sustained move under .6822 will signal the return of sellers. There is plenty of room to the downside under this level so we could see an acceleration to the downside with the next target a steep uptrending Gann angle at .6470 over the near-term.
For longer-term traders, a sustained move over .7132 will be bullish, while a sustained move under .6822 will be bearish.
Due to the prolonged move up in terms of price and time, traders should start watching for signs of counter-trend selling. The best sign of intense selling pressure will be a weekly closing price reversal top.