The Australian Dollar closed higher last week after consolidating for two weeks inside a tight range. Short-covering and some counter-trend buying drove the price action as investors continued to adjust to a steep drop in U.S. Treasury yields. The interest rate differential continued to tighten making the U.S. Dollar a less-desirable asset as investors began to price in a possible U.S. Federal Reserve rate cut for June or July.
Last week, the AUD/USD settled at .7003, up 0.0065, or +0.93%.
This week traders will get the opportunity to react to U.S. consumer inflation data and Australian Employment reports.
Weekly Technical Analysis
The main trend is down according to the weekly swing chart. What we’ve been seeing the last three week’s has been a rally in a bear market. Short-sellers have been booking profits in order to adjust to the tightening interest rate differential between U.S. Government bonds and Australian government bonds.
A trade through .6864 will signal a resumption of the downtrend with the next target the .6764 main bottom. A trade through .7206 will change the main trend to up.
The main range is .7394 to .6764. Its retracement zone at .7079 to .7153 is the primary upside target. Since the trend is down, sellers are likely to come in on a test of this zone.
Weekly Technical Forecast
Based on last week’s price action and the close at .7003, the direction of the AUD/USD this week is likely to be determined by trader reaction to the uptrending Gann angle at .6994.
A sustained move over .6994 will signal the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the 50% level at .7079. Look for sellers on the first test. Overcoming it will indicate the buying is getting stronger. This could trigger a further rally into the downtrending Gann angle at .7124.
A sustained move under .6994 will indicate the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the next uptrending Gann angle at .6879. This angle stopped the selling at .6864 during the week-ending May 17. This is the last potential support angle before the .6764 main bottom.
Crossing to the weak side of the downtrending Gann angle at .6854 will put the AUD/USD in a bearish position.
This article was originally posted on FX Empire