The Australian dollar rose slightly on Friday on light holiday shopping. With the big banks on the fringes of Australia and the United States, commerce was likely limited to IT business. Despite the lackluster move, the Aussie still remained within easy reach of his June 6, 2018 main high at 0.7677.
AUD / USD stood at 0.7600 on Friday, up 0.0009 or + 0.11%.
The trade-sensitive Australian dollar extended its gains on Friday in reaction to the Brexit trade deal reached between Britain and the European Union the day before. This news has raised hopes that the UK can avoid a turbulent economic start at the end of the year.
The Brexit news has overshadowed any concerns over US President Donald Trump’s request for changes to a coronavirus aid bill, effectively threatening the government shutdown next week.
Technical analysis of the daily swing chart
The main trend is up according to the daily swing chart, but the momentum is down. A trade passing through .7640 will signal a resumption of the uptrend and bring back upward momentum. A move to .7339 will change the main trend down.
The minor trend is downward. It’s controlling momentum. A trade passing through .7462 will reaffirm the bearish trend.
The minor range is 0.7640 to 0.7462. Its 50% level at 0.7551 is support. Standing above this area will help support our upward bias.
The short term range is 0.7339 to 0.7640. Its 50% level at 0.7489 is another level of support.
Although the minor trend turned lower 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 uptrend, buyers are likely to continue to make minor corrections.
The outlook for the Australian dollar remains optimistic although a little late for a corrective position adjustment. However, in this case the “trend is your friend” so it doesn’t make sense to try and pick a top. If there is a near-term high, it will likely be fueled by a slowdown in buying rather than an increase in selling.
At the moment, it seems the most likely reason for a near-term peak is a nationwide surge in coronavirus cases. Investors would read this as a step back and likely use the news to record profits.
Holding above 0.7551 will signal the presence of buyers. This could trigger a rally towards .7640, followed by .7677. Exceeding this level could signal the start of a possible rally towards the main high of April 19, 2018 at 0.7812.
A move below 0.7551 will indicate the presence of sellers. The next medium is .7489 and .7462. We will likely see an acceleration to the downside if .7462 comes out with significant volume.
For an overview of all of today’s economic events, check out our economic calendar.