AUD/USD Forex Technical Analysis – Trader Reaction to Weekly Mid-Point at .6583 Sets Late Session Tone

The Australian Dollar is edging higher on Thursday in a move that could be related to profit-taking or end-of-the-month position-squaring. Nothing changed in the fundamentals overnight to warrant a rally. In fact, the news was primarily on the bearish side.

Australia’s 10-year bond yield fell to a new record low of 0.845 percent after Australia’s Prime Minister Scott Morrison said risk of global pandemic is very much upon us, while urging the need to take action.

Additionally, Australia private capital expenditure dropped -2.8% in Q4, much worse than expectation of 0.5% increase. In seasonally adjusted terms, building and structures dropped -5.9%. Mining dropped -2.7%. Equipment, plant and machinery rose 0.8%. Manufacturing dropped -10.1% and other selected industries fell -1.9%.

At 08:53 GMT, the AUD/USD is trading .6572, up 0.0027 or +0.42%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6543 will signal a resumption of the downtrend. The main trend will change to up on a move through .6750, which is highly unlikely at this time.

Daily Forecast

The AUD/USD is picking up a little strength in the European session. Most of the short-covering is likely tied to the small rebound from session lows in the U.S. stock index futures markets.

Despite the early session strength, the Aussie is still trading lower for the week and slightly below its weekly mid-point at .6583 that could prove to be resistance later today.

Upside momentum could increase over .6583, but sellers are likely to be waiting at a pair of downtrending Gann angles at .6614 and .6622. Since the main trend is down, sellers are likely to re-emerge on a test of this area.

On the downside, since nothing took place on the fundamental side that would suggest the AUD/USD has found support, we’re expecting lower prices over the near-term. Weak Chinese economic growth is likely be a drag on the Australian economy so we expect the Aussie to continue to move toward its March 3, 2009 main bottom at .6285.

However, the announcement of government stimulus measures could trigger a sharp short-covering rally at any time.