AUD/USD Momentum Change Indicates Possible 2-3 Day Sell-Off

The Australian Dollar closed lower on Friday, giving back early gains after escalating tensions in Ukraine and U.S. warnings of a potential Russian invasion prompted investors to trim their bullish positions and seek shelter in the safe-haven U.S. Dollar ahead of the long U.S. holiday weekend.

On Friday, the AUD/USD settled at .7178, down 0.0010 or -0.14%. The Invesco CurrencyShares Australian Dollar Trust EFT (FXA) finished at $71.13, down $0.17 or -0.24%.

The Aussie Dollar was also pressured by comments from New York Fed Bank President John Williams who said it would be appropriate to hike interest rates in March, without mentioning the magnitude.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7228 will signal a resumption of the uptrend. A move through .7249 will reaffirm the uptrend. The main trend will change to down on a trade through .7086.

The short-term range is .7314 to .6967. The AUD/USD closed inside its retracement zone at .7140 to .7181. This zone is controlling the near-term direction of the Forex pair.

The minor range is .6967 to .7249. Its retracement zone at .7108 to .7075 is the next downside target. Its Fibonacci level at .7075 is a potential trigger point for an acceleration to the downside.

The major resistance is the retracement zone at .7262 to .7331. Its 50% level at .7331 is a potential trigger point for an acceleration to the upside.

Short-Term Outlook

Friday’s potentially bearish closing price reversal top is the first sign that momentum may be getting ready to shift to the downside. A trade through .7165 will confirm the chart pattern. This could trigger the start of a 2-3 day correction.

We’re also in a news driven market with all eyes on the escalating tensions in Eastern Europe.

If Russia attacks Ukraine then global investors will likely dump risky currencies like the Australian Dollar and move money into the safe-haven U.S. Dollar. This could trigger a break by the AUD/USD into at least .7140, but possibly through .7075. This could trigger an acceleration to the downside.