The Australian Dollar closed higher for a second day on Friday and even for the week as investors adjusted positions to the possibility that a slowing U.S. economy will lead to an eventual rate cut by the U.S. Federal Reserve later in the year.
Contrary to what some traders believe, the move had nothing to do with a shift in Reserve Bank of Australia monetary policy, but rather to the steep plunge in U.S. Treasury yields. The drop in yields helped tighten the spread between U.S. Government bond yields and Australian Government bond yields, making the U.S. Dollar a less-attractive asset.
On Friday, the AUD/USD settled at .6928, up 0.0028 or +0.41%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, momentum is trending higher. The main trend will change to up on a move through .7069. A trade through .6864 will signal a resumption of the downtrend.
The minor trend is up. It turned up on Monday when buyers took out .6935. The move took place with light volume due to a U.S. bank holiday. This shifted momentum to the upside. A trade through .6864 will turn the minor trend to down, and shift momentum to the downside.
The daily chart shows there is plenty of room to the downside under .6864 with the January 3 bottom at .6764 the primary target. The daily chart also shows a wall of retracement level resistance overhead.
The short-term range is .6864 to .6936. Its 50% level or pivot is providing support at .6900.
The intermediate range is .7069 to .6864. Its retracement zone is .6967 to .6991.
The longer-term retracement zone is .6967 to .7030.
Combining the levels makes .6967 a potential resistance cluster.
Daily Swing Chart Technical Forecast
Based on the early price action and Monday’s U.S. banking holiday, we’re likely to see a low volatility, tight range today. Nonetheless, if you’re trading then reaction to .6935 is likely to set the tone today.
A sustained move over the former minor top at .6935 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the resistance cluster at .6967.
A sustained move under .6935 will signal the presence of sellers. If the selling is strong enough then look for a pullback into the short-term pivot at .6900.
This article was originally posted on FX Empire
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