Based on last week’s close at .7427 and the chart pattern, the direction of the AUD/USD this week will be determined by trader reaction to .7445. The main trend is down according to the weekly swing chart. However, last week’s closing price reversal bottom may be signaling a shift in momentum to the upside.
Lower U.S. Treasury yields helped boost the Australian Dollar against the U.S. Dollar last week. Yields fell in response to the mixed U.S. Non-Farm Payrolls report which showed a better-than-expected headline number, but an unexpected rise in the unemployment rate and weaker-than-expected average hourly earnings.
The AUD/USD settled the week at .7427, up 0.0020 or +0.27%.
As a result of the jobs report, expectations of a fourth U.S. Federal Reserve rate hike later this year declined. According to the Fed Funds Indicator, investors priced in a 77 percent chance of a September rate hike, down from 80 percent before the jobs data.
So while a September rate hike is still a likely event, traders feel that without an acceleration of wage growth, a fourth hike at the end of the year is a more difficult call and the futures market shows that traders are putting the odds of a December rate hike at about 50 percent.
The drop in Treasury yields made the U.S. Dollar a less-desirable investment, while tightening the spread between U.S. Government bonds and Australian Government bonds.
Weekly Swing Chart Technical Analysis
The main trend is down according to the weekly swing chart. However, last week’s closing price reversal bottom may be signaling a shift in momentum to the upside. A trade through .7445 this week will confirm the chart pattern. It won’t mean the trend is changing to up, but it could trigger the start of a 2 to 3 week correction of the main trend.
A trade through .7677 will change the main trend to up. A move through .7310 will negate the closing price reversal bottom and signal a resumption of the downtrend. This would put the AUD/USD on course for a potential test of the December 23, 2016 main bottom at .7159.
The short-term range is .7677 to .7310. Its retracement zone at .7494 to .7537 is the primary upside target. Another major Fibonacci level comes in at .7532. This makes .7532 to .7537 the best upside target. Since the main trend is down, sellers are likely to show up on a test of this area.
Weekly Swing Chart Technical Forecast
Based on last week’s close at .7427 and the chart pattern, the direction of the AUD/USD this week will be determined by trader reaction to .7445.
A sustained move over .7445 will signal the presence of buyers. This could drive the Forex pair into layers of potential resistance at .7494, .7532 and .7537.
A sustained move under .7445 will indicate the presence of sellers. If the selling pressure is strong enough then look for a retest of .7310. This is a potential trigger point for an acceleration to .7159.