The Australian Dollar edged higher on Friday on light holiday buying. With the major banks on the sidelines in Australia and the United States, the trade was likely limited to computer activity. Despite the lackluster move, the Aussie still remained within striking distance of its June 6, 2018 main top at .7677.
On Friday, the AUD/USD settled at .7600, up 0.0009 or +0.11%.
The trade-sensitive Aussie Dollar extended its gains on Friday in reaction to the Brexit trade deal struck by Britain and the European Union the day before. The news raised hopes that the United Kingdom can avoid a turbulent economic departure at the end of the year.
The Brexit news overshadowed any concern from U.S. President Donald Trump’s demand for changes to a coronavirus aid bill, effectively threatening a government shutdown next week.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, but momentum is trending lower. A trade through .7640 will signal a resumption of the uptrend and shift momentum back to the upside. A move through .7339 will change the main trend to down.
The minor trend is down. This is controlling the momentum. A trade through .7462 will reaffirm the downtrend.
The minor range is .7640 to .7462. Its 50% level at .7551 is support. Holding above this zone will help support our upside bias.
The short-term range is .7339 to .7640. Its 50% level at .7489 is another support level.
Although the minor trend changed to down on Monday, the strong rebound suggests the move was likely fueled by sell stops rather than aggressive shorting. The move also suggests that with the main trend up, buyers are likely to continue to come in on minor corrections.
The outlook for the Australian Dollar remains bullish although a little overdue for a position-adjusting correction. However, in this case the “trend is your friend” so it doesn’t make sense to try to pick a top. If there is a short-term top, it will likely be fueled by a slowdown in the buying rather than an increase in the selling.
At this time it seems the most likely reason for a short-term top will be a domestic surge in coronavirus cases. Investors would read this as a step backward and likely use the news to book profits.
Holding above .7551 will signal the presence of buyers. This could trigger a rally into .7640, followed by .7677. Overcoming this level could signal the start of an eventual rally to the April 19, 2018 main top at .7812.
A move under .7551 will indicate the presence of sellers. The next support is .7489 and .7462. We’re likely to see an acceleration to the downside if .7462 is taking out with meaningful volume.
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