Australian Dollar May Have Reached Value Area on Friday

The Australian Dollar fell to a multi-year low on Friday as traders priced a year ahead of aggressive hikes in U.S. interest rates, following a week highlighted by a hawkish Federal Reserve meeting.

The Aussie was on the defensive all week as world stock markets extended their slide and geopolitical tensions darkened the mood further, even outweighing a big upside surprise on domestic inflation.

On Friday, the AUD/USD settled at .6996, down 0.0038 or -0.54%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finishedat $69.3 6, down $0.38 or -0.55%.

Core inflation jumped to an annual 2.6% in the December quarter, blowing away forecasts of 2.3% and above the middle of the Reserve Bank of Australia’s (RBA) 2-3% target band. The shock report only encouraged market wagers on an early rise in interest rates, with futures now almost fully priced for a move to 0.25% in May.

The prediction of a 0.25% rate hike by the RBA was definitely not enough to overtake the forecast for at least four rate hikes by the Fed in 2022. The advantage goes to the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Friday when sellers took out a pair of main bottoms at .6993 and .6991.

Short-Term Outlook

The price action late in the session on Friday suggests counter-trend buyers came in to defend the July 16, 2020 main bottom at .6963. It may have been fueled by position-squaring ahead of the week-end, but this price is definitely one to watch on Monday since the move may be indicating the aud/usd has reached a value area.

Look for an early upside bias to develop on a sustained move over .6993 and for the downside bias to continue on a sustained move under .6963 with the potential for an acceleration into the July 14, 2020 main bottom at .6921.