The Australian Dollar closed marginally higher on Friday as investors continued to adjust positions to the 100% probability of a U.S. Federal Reserve rate cut on July 31, and increasing odds of additional rate cuts in September and December.
Gains were likely limited because the Australian markets are now pricing in a 70% chance of a Reserve Bank of Australia (RBA) rate cut on July 2. This is up from the 50% level posted after the central bank released the minutes from its last monetary policy meeting on June 17.
Traders turned increasingly dovish after RBA Governor Lowe said in a speech last week that it is not too unrealistic to expect a further reduction in interest rates as there is considerable spare capacity in the labor market despite strong jobs growth.
On Friday, the AUD/USD settled at .6926, up 0.0054 or +0.79%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, momentum shifted to the upside with the formation of the closing price reversal bottom at .6832 on June 18 and its subsequent confirmation.
The main trend will change to up on a trade through .7022 with .7069 the next likely target. A trade through .6832 will negate the closing price reversal bottom and signal a resumption of the downtrend with the January 3 main bottom at .6864 the next likely downside target.
The short-term range is .7022 to .6832. Its retracement zone at .6926 to 6949 is the first upside target. This zone stopped the rally on Friday.
The main range is .6764 to .7296. Its retracement zone at .6967 to .7030 is main upside target. Since the main trend is down, look for sellers on a test of this zone.
Daily Swing Chart Technical Forecast
Based on Friday’s close at .6926, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the short-term 50% level at .6926.
A sustained move over .6926 will indicate the presence of buyers. The next target is the short-term Fibonacci level at .6949, followed by the main Fibonacci level at .6967. Watch for sellers.
A sustained move under .6926 will signal the presence of sellers. The first downside target is .6885. This is followed by .6832. Aggressive counter-trend buyers may try to form a secondary higher bottom on the first test of .6885.
This article was originally posted on FX Empire