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The Australian Dollar closed on its high on Friday after changing the main trend to up. The currency also finished the week sharply higher. The catalysts behind the nine day rally are expectations of a rate cut by the Federal Reserve at its next meeting in late July, and the thought that the rate cut on July 2 by the Reserve Bank of Australia (RBA) will be the last for the year based on comments about its effectiveness by RBA Governor Philip Lowe.
On Friday, the AUD/USD settled at .7022, up 0.0014 or +0.20%.
Prices could get a boost on Monday after U.S. President Trump and Chinese President Xi Jinping agreed to resume trade talks.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out the last swing top at .7022. The trend will change to down on a trade through .6832. This is highly unlikely, but investors will have to watch for a closing price reversal top.
One main range at .6764 to .7296 produced a retracement zone at .7030 to .6967. The AUD/USD is currently trading inside this zone.
The second main range is .7394 to .6764. Its retracement zone at .7079 to .7153 is the next potential upside target.
Even with the trend up, we could see aggressive counter-trend selling on a test of these retracement zones.
Daily Swing Chart Technical Forecast
Based on Friday’s close at .7022, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the 50% level at .7030.
Bullish Scenario
A sustained move over .7030 will indicate the buying is getting stronger. This could trigger an acceleration into the main top at .7069 and the next 50% level at .7079.
Bearish Scenario
A sustained move under .7030 will signal the return of sellers. If they are able to generate enough downside momentum then look for a potential break into the Fibonacci level at .6967.
Overview
Even though the news about trade talks is potentially bullish for the Australian economy, it may be hard for the Australian Dollar to overcome the impact of higher U.S. Treasury yields and the possibility the Fed may take a pass on a July rate cut.
This article was originally posted on FX Empire