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The Australian Dollar is inching lower on Thursday after failing to follow-through to the upside following yesterday’s huge short-covering rally.
Today’s early weakness may be tied to negative news about the Chinese economy, Australia’s biggest trading partner. Reuters is reporting a growing number of analysts are cutting Chinese growth forecasts. Shanghai authorities said on Thursday the number of COVID-19 cases outside quarantined areas in the city rose again, warning tough lockdown restrictions would remain in place for now even in districts which managed to cut transmissions to zero.
At 07:38 GMT, the AUD/USD is trading .7448, down 0.0003 or -0.04%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $73.80, up $0.63 or +0.86%.
The news about China’s economy is only one piece of the puzzle, however, with the biggest piece U.S. Treasury yields and the U.S. Dollar. Ultimately, whether U.S. yields and the U.S. Dollar reverse back up will determine the direction of the Aussie on Thursday.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through .7343 will signal a resumption of the downtrend. A move through .7661 will change the main trend to up.
The minor trend is also down. A trade through .7494 will change the minor trend to up. This will shift momentum to the upside.
The AUD/USD is currently trading on the strong side of a pair of 50% levels at .7429 and .7413, making them support. Another support level comes in at .7354.
On the upside, the nearest resistance is a 50% level at .7502, followed by a long-term Fibonacci level at .7538.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Thursday is likely to be determined by trader reaction to the pivots at .7429 and .7413.
Bullish Scenario
A sustained move over .7429 will indicate the presence of buyers. Taking out yesterday’s high at .7458 will indicate the buying is getting stronger. This could trigger a surge into the resistance cluster at .7494 to .7502.
Bearish Scenario
A break under .7429 will be the first sign of weakness. A sustained move under .7413 will indicate the selling pressure is getting stronger. If this creates enough downside momentum then look for the selling to possibly extend into the support cluster at .7354 to .7343. The latter is a potential trigger point for an acceleration to the downside.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire