AUD/USD Reaction to .7068 – .7044 Sets Early Tone Monday

The Australian Dollar closed lower on Friday amid a strong advance in its U.S. counterpart after a report showed the world’s largest economy created far more jobs than expected. U.S. Treasury yields jumped on the news as job growth raised the chances of a larger Federal Reserve interest rate increase at its March policy meeting.

On Friday, the AUD/USD settled at .7077, down 0.0063 or -0.88%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finished at $70.70, up $0.05 or +0.08%.

Treasury yields rose on Friday as investors reacted to a surprisingly strong January jobs report, making the U.S. Dollar a more attractive asset.

The labor market report’s headline number and the internals were very strong, solidifying a 25 basis point hike in March and the possibly of a 50 bp rate hike later in the year.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7168 will change the main trend to up. A move through .6967 will signal a resumption of the downtrend.

The minor range is .6967 to .7168. On Friday, the AUD/USD closed slightly above its retracement zone at .7067 – .7044, making it support. This area stopped the selling at .7070 the previous session.

The short-term range is .7314 to .6967. Its retracement zone at .7141 to .7181 is resistance. This area stopped the buying at .7168 on February 3.

The major resistance zone is .7262 to .7331. This zone is controlling the near-term direction of the AUD/USD.

Short-Term Outlook

The short-term direction of the AUD/USD is likely to be determined by trader reaction to .7068 to .7044.

A sustained move over .7068 will signal the presence of aggressive counter-trend buyers. They are trying to form a potentially bullish secondary higher bottom. If this creates enough upside momentum then look for a surge into .7141.

A sustained move under .7044 will indicate the presence of sellers. If this creates enough downside momentum then look for a possible break into the support cluster at .6967 – .6963.