The Australian Dollar posted a potentially bullish closing price reversal bottom on Friday after testing its lowest level since October 7 early in the session. The chart pattern won’t change the main trend to up, but if confirmed, it could lead to a 2 to 3 day counter-trend rally.
On Friday, the AUD/USD settled at .7330, up 0.0040 or +0.55%.
Helping to keep a lid on prices is the higher-than-expected U.S. inflation reading for October. This news is leading investors to increase bets for a sooner-than-expected rate hike by the Federal Reserve.
Friday’s rapid intraday recovery was fueled by a bearish consumer confidence report from the University of Michigan. The U of M said its preliminary sentiment index dropped to 66.8 this month, a 6.8 percent decline.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, momentum may be getting ready to shift to the upside, following the formation of the closing price reversal bottom.
A trade through .7335 will confirm the chart pattern, shifting momentum to the upside and setting up the possibility of a 2 to 3 day counter-trend rally. A trade through .7431 changes the main trend to up.
A move through .7277 will negate the closing price reversal bottom and signal a resumption of the downtrend.
The main range is .7170 to .7556. The AUD/USD is currently testing its retracement zone at .7317 to .7363. The zone is controlling the near-term direction of the Forex pair.
The short-term range is .7556 to .7277. Its 50% level at .7417 is the next upside target and potential resistance.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD early Monday is likely to be determined by trader reaction to .7318.
A sustained move over .7318 will indicate the presence of buyers. Taking out .7335 will confirm the closing price reversal bottom. This could create the upside momentum needed to challenge .7363.
Look for sellers on the first test of .7363, but if it fails then look for a short-term surge into .7416.
A sustained move under .7317 will signal the presence of sellers. If this move creates enough downside momentum then look for the weakness to possibly extend into .7277.
Taking out .7277 will signal a resumption of the downtrend and could trigger an acceleration into the next main bottom at .7226 over the near-term.