The Australian Dollar is trading lower early Friday after posting a steep sell-off the previous session. The selling pressure is being fueled by a dovish Reserve Bank of Australia quarterly Statement on Monetary Policy and weaker-than-expected economic growth projections.
At 0339 GMT, the AUD/USD is trading .7373, down 0.0002 or -0.02%.
Early Friday, the RBA confirmed it has downgraded its 2018 inflation forecast, after flagging the change in Tuesday’s rates decision. Its longer-term outlook for inflation was little-changed. The central bank now expects core inflationary pressure to remain low through the end of 2020.
Daily Swing Chart Technical Analysis
The price action was wicked on Thursday, with the AUD/USD attempting a breakout to the upside after taking out a pair of minor tops at .7440 and .7442. However, the rally failed to take out the main top at .7465 and selling pressure increased enough to form an outside move, lower close.
Based on the early price action, the new main top is .7453, down from .7465. A trade through .7348 will change the main trend to down.
The minor trend is also up, however, yesterday’s closing price reversal top helped shift momentum to the downside.
The close under a series of retracement levels is also signaling a shift in momentum to the downside. They now form resistance levels at .7392, .7397, .7407 and .7420.
Daily Swing Chart Technical Forecast
Based on yesterday’s close at .7374 and the early price action, the direction of the AUD/USD on Friday is likely to be determined by trader reaction to the short-term 50% level at .7392.
A sustained move under .7392 will signal the presence of sellers. A sustained move under .7374 will indicate the selling pressure is getting stronger. If this can create enough downside momentum then look for a potential break into the next main bottom at .7348. Taking out this level will change the main trend to down, setting up a potential test of the July 20 bottom at .7318.
Now that the AUD/USD has taken out the previous day’s low, a move back over the previous close at .7374 will put it in a position to post a reversal bottom. If this occurs then look for a potential rally into the series of 50% levels at .7392, .7397 and .7407.