AUD/USD Forex Technical Analysis – Weakens Under .6604, Could Strengthen Over .6644

The Australian Dollar is drifting lower on Friday, but holding on to its weekly gains. Helping to underpin the Aussie are lower U.S. Treasury yields and expectation of further rate cuts by the U.S. Federal Reserve, while the Reserve Bank of Australia has little room to cut as aggressively with its benchmark rate sitting at 0.50%.

At 06:19 GMT, the AUD/USD is trading .6604, down 0.0014 or -0.21%.

Weighing on the Australian Dollar is a report that showed retail sales were hit in January as bushfires and elevated pollution levels interrupted trading hours and tourism numbers.

Aussie retail sales in the month fell 0.3 percent on a seasonally adjusted basis, extending its fall from the previous month. Economists were expecting a flat result for the month however estimates had varied wildly from a 0.7 percent fall to a 0.4 percent rise.

In December, retail sales had dropped 0.7 percent (revised lower from 0.5 percent), well below economists’ expectations for a 0.2 percent decline, after sales in November soared due to the increase in major shopping events such as Black Friday and Cyber Monday.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6434 will signal a resumption of the downtrend. The main trend will change to up when buyers take out the last main tops at .6750 and .6774.

The main range is .6774 to .6434. Its retracement zone at .6604 to .6644 has been providing resistance most of the week.

The minor range is .6434 to .6645. Its 50% level or pivot at .6539 is potential support.

Daily Technical Forecast

Based on the early price action and the current price at .6604, the direction of the AUD/USD the rest of the session on Friday is likely to be determined by trader reaction to the 50% level at .6604.

Bullish Scenario

A sustained move over .6604 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the short-term Fibonacci level at .6644, the high of the week at .6645 and the downtrending Gann angle at .6664.

Taking out .6664 could trigger an acceleration to the upside with the next target angle dropping in at .6719. This is followed by a pair of main tops at .6750 and .6774.

Bearish Scenario

A sustained move under .6604 will signal the presence of sellers. The first downside target is a pair of downtrending Gann angles at .6562 and .6554. This is followed closely by the pivot at .6539.

A move through .6539 could trigger an acceleration to the downside with the next major target the multi-year low at .6434.