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The Australian Dollar fell against the U.S. Dollar on Friday, as the Fed’s tone offset a hawkish shift from Australia’s central bank, while a pullback in commodity prices also reversed some of their recent strength.
The greenback has been strengthening against the U.S. Dollar since Wednesday after minutes from the March Fed meeting showed “many” participants were prepared to raise interest rates in 50-basis-point increments in coming months.
The Fed also said it will reduce its balance sheet after the May meeting at a rate of $95 billion per month, the beginning of the reversal of the massive stimulus it pumped into the economy during the pandemic.
On Friday, the AUD/USD settled at .7460, down 0.0019 or -0.25%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) closed at $73.91, down $0.24 or -0.32%.
Early in the week, the Australian Dollar soared to its highest level since November 2021, boosted by the prospect of policy tightening by the Reserve Bank of Australia (RBA). The central bank dropped its pledge to be “patient” on tightening policy, while holding the key rate at a record low for now, as was expected.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The trend turned down when sellers took out the last swing bottom at .7456.
A trade through .7426 will signal a resumption of the downtrend. The main trend will change to up on a move through .7661.
The AUD/USD is currently trading inside the long-term retracement zone at .7429 to .7538.
The short-term range is .7165 to .7661. Its retracement zone at .7413 to .7354 is the second target area.
Short-Term Outlook
The direction of the AUD/USD early Monday is likely to be determined by trader reaction to the long-term 50% level at .7429.
Bullish Scenario
A sustained move over .7429 will indicate the presence of buyers. If this creates enough upside momentum then look for a retracement into the long-term Fibonacci level at .7538, followed closely by the minor pivot at .7544.
Bearish Scenario
A sustained move under .7413 will signal the presence of sellers. The first target is the short-term 50% level at .7413.
Watch for a technical bounce on the first test of .7429 to .7413. However, if .7413 fails to hold as support, the selling could possibly extend into the short-term Fibonacci level at .7354. This 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
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