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AUD/USD Forex Technical Analysis – Break Through .6434 Could Create Momentum Needed to Challenge 11-Year Low

James Hyerczyk

The Australian Dollar plunged early in the session on Friday, moving closer to the March 3, 2009 main bottom at .6285, as traders priced in expectations of weaker domestic growth in reaction to the impact of coronavirus. However, dovish comments from Federal Reserve Chair Jerome Powell triggered an intraday short-covering rally after he suggested the central bank could cut interest rates.

On Friday, the AUD/USD settled at .6506, down 0.0063 or -0.96%.

Powell on Friday said the central bank will “act as appropriate” to support the economy in the face of risks posed by the coronavirus outbreak, though he said the economy remained in solid condition.


Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through Friday’s low at .6434 will reaffirm the downtrend.

A trade through .6750 will change the main trend to up. It will be reaffirmed by a move through the next main top at .6774. This is highly unlikely, but due to the prolonged move down in terms of price and time, the AUD/USD may be ripe for a closing price reversal bottom. However, this type of potentially bullish chart pattern is often fueled by a catalyst. In this case, the catalyst will likely be related to positive news from China.

Short-Term Outlook

The selling stopped on Friday stopped when the AUD/USD hit a steep downtrending Gann angle at .6434.

If the downside momentum continues on Monday then look for sellers to make another run at .6434. Crossing to the weak side of the downtrending Gann angle will put the AUD/USD in a bearish position with the next major downside target the March 3, 2009 main bottom at .6285.

If Friday’s short-covering rally resumes then look for a possible rally into a pair of downtrending Gann angles at .6604 and .6611. The latter is a potential trigger point for an acceleration to the upside.

Overtaking the angle at .6611 could trigger a surge into the next downtrending Gann angle at .6689.

Side Notes

China released a pair of bearish reports over the weekend so traders should brace for a sharply lower opening on Monday. Both its manufacturing and non-manufacturing PMI reports hit record lows. However, since the data was compiled, Chinese factories have reopened, albeit at a slow pace. This is raising expectations that China’s March PMI numbers should come in better than February’s data. This could produce a two-sided trade.

This article was originally posted on FX Empire