The Australian Dollar closed lower on Friday while posting its worst weekly performance since mid-March as investors bet on further monetary policy easing in the country.
Investor attention is squarely on the October 6 board meeting of the Reserve Bank of Australia (RBA) where some economists are predicting a cash rate cut to 10 basis points. On the same day, the federal government will unveil its annual budget where it is seen to keep the fiscal tap open for years to come.
On Friday, the AUD/USD settled at .7031, down 0.0015 or -0.21%.
Weaker risk appetite has also weighed on the Aussie led by dour global economic data, fresh coronavirus restrictions in Europe and fading hopes of U.S. fiscal stimulus.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, the Aussie is down seven sessions from its last main top, which means we should start watching for a closing price reversal bottom according to our 7 to 10 day rule. This chart pattern won’t change the main trend, but it could alleviate some of the downside pressure with a 2 to 3 day counter-trend rally.
Taking out .7006 will signal a resumption of the downtrend. The trend will change to up on a trade through the last main top at .7345.
The short-term range is .6777 to .7414. The AUD/USD is currently straddling its retracement zone at .7096 to .7020. Trader reaction to this zone will likely determine the near-term direction of the Forex pair.
The new minor range is .7345 to .7006. If there is a shift in momentum to the upside then its 50% level at .7176 will become the next upside target.
The dovish tone from the RBA and the stronger U.S. Dollar is likely to continue to weigh on sentiment. This means sellers are going to try to pound the AUD/USD through the short-term Fibonacci level at .7020. If they can successfully turn that price into resistance then look for a possible acceleration to the downside since the daily chart indicates there isn’t any support until .6833 to .6777.
Meanwhile, holding .7020 and overcoming .7096 will indicate that counter-trend buyers are winning the battle inside this retracement zone. If successful, they could generate the upside momentum needed to challenge the minor 50% level at .7176. This makes sense if you think there is going to be a short-covering rally ahead of the RBA meeting on October 6.
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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