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AUD/USD Forex Technical Analysis – Upside Bias Over .6718, Downside Bias Under .6706

The Australian Dollar inched lower on Friday, but still managed to close higher for the week. The Aussie continued to be supported by the Reserve Bank’s (RBA) optimistic outlook for the economy, but gains were likely capped by the strong U.S. economy and uncertainty over the economic impact of the coronavirus on China’s economy, Australia’s largest trading partner.

On Friday, the AUD/USD settled at .6714, down 0.0005 or -0.08%.

Daily AUD/USD
Daily AUD/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart. The trend will change to up on a trade through the last main top at .6774. A move through .6662 will signal a resumption of the downtrend.

The minor trend is also down. Taking out .6750 will change the minor trend to up. This will also shift momentum to the upside.

The minor range is .6662 to .6750. Its 50% level at .6706 is acting like support.

The short-term range is .6774 to .6662. Its 50% level at .6718 is acting like resistance.

The intermediate range is .6934 to .6662. If the main trend changes to up then look for the rally to extend into the retracement zone at .6798 to .6830.

Daily AUD/USD
Daily AUD/USD

Short-Term Outlook

The recent price action suggests the Aussie is still in the short-covering phase. The first leg up following a major decline is usually fueled by short-covering. Since the AUD/USD is still only grinding higher, we have to assume that only the weaker shorts have covered so far.

The first sign that the short-covering rally is over will be the formation of a secondary higher bottom. There is no evidence of this taking place yet.

Trader reaction to the two 50% levels at .6706 and .6718 will tell us if the counter-trend buying is getting stronger, or the selling pressure persists.

Don’t be surprised if the AUD/USD straddles the two 50% levels for a few days in the upcoming week. Investors dumping positions in riskier assets will drive it lower, while investors having a more optimistic outlook for the global economy and those who feel the coronavirus outbreak has peaked could provide support. Both types of traders will be influenced by ever-changing headlines until real numbers start to come out of China about the economy.

Watch the price action at .6718 and .6706. A sustained move over .6718 will indicate the presence of buyers, but don’t get too excited about the upside unless .6774 is taken out with conviction.

A sustained move under .6706 will draw the attention of sellers. Taking out .6662 will signal the resumption of the downtrend.

This article was originally posted on FX Empire

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