AUD/USD Forex Technical Analysis – Global Central Bankers Ignite Rally that Could Challenge .7777

The AUD/USD finished sharply higher on Thursday and is currently in a position to post a surprisingly strong gain for the week. The Australian Dollar is profiting from a weaker U.S. Dollar and hawkish comments from global central bankers this week.

European Central Bank President Mario Draghi ignited a Euro rally on Tuesday, when he noted that “reflationary forces have replaced deflationary forces” and hinted that the ECB could trim its stimulus this year. Draghi’s comments drove the dollar sharply lower and opened the door for other global central bankers to give their opinion on the direction of interest rates.

Top central bankers from the U.K., Canada and New Zealand have this week, to varying degrees, talked about the need to follow the Fed’s lead and raise interest rates.

Bank of England Governor Mark Carney said on Wednesday that the central bank is likely to need to raise interest rates as the U.K. economy comes closer to operating at full capacity.

Bank of Canada chief Stephen Poloz said rate cuts had done their job and the bank needed to consider its options at its upcoming policy meeting.

The hawkish global central banker comments drove the U.S. Dollar lower, helping to make the Australian Dollar a more attractive investment. Strong gains in key commodities such as iron ore was also a positive for the Aussie Dollar.

Technical Analysis

We’re trying to eliminate some of the noise in the market seen on the daily chart this week so we’re going to focus on the weekly chart.

The main trend is down according to the weekly swing chart, but momentum is clearly to the upside. The strong close on Thursday has put the AUD/USD in a position to challenge the next swing top at .7749. Taking out this top will change the main trend to up and likely lead to a test of the November 8, 2016 main top at .7777.

The main range is .7749 to .7329. The market is currently trading on the strong side of its retracement zone at .7589 to .7539. These levels are now support.

Forecast

Based on Thursday’s close at .7681, the direction of the AUD/USD on Friday is going to be determined by trader reaction to the weekly downtrending angle at .7679.

A sustained move over .7679 will indicate the presence of buyers. This could trigger a move into the next downtrending angle at .7711. This is the last potential resistance angle before the main tops at .7749 and .7777.

A sustained move under .7679 will signal the presence of sellers. This could trigger an acceleration to the downside with the next major target angle coming in at .7609.