AUD/USD Forex Technical Analysis – Will Need Help from China to Sustain Friday’s Counter-Trend Reversal

A strong short-covering rally on Friday helped the Australian Dollar eke out a small gain ahead of the week-end. The rebound was fueled by a recovery in China. Greater China markets posted a strong comeback on Friday, following a series of measures announced by Chinese leaders to support the struggling stock market. By market close, the Shanghai Composite and the Shenzhen Composite had surged 2.59 percent.

The AUD/USD closed on Friday at .7120, up 0.0020 or +0.28%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7160 will change the main trend to up. A move through .7042 will signal a resumption of the downtrend.

The minor trend is down. It turned down when sellers took out .7098 on Friday. It will turn up on a move through .7160. This will also shift momentum to the upside. A move through .7089 will indicate the selling pressure is getting stronger.

The short-term range is .7042 to .7160. Its retracement zone at .7101 to .7087 is support. This zone stopped the selling on Friday at .7089.

The main range is .7314 to .7042. If the trend changes to up then look for the rally to continue into its retracement zone at .7178 to .7210. Sellers could come in on a test of this zone. This retracement zone is controlling the longer-term direction of the AUD/USD.

Daily Swing Chart Technical Forecast

Based on Friday’s price action, the direction of the AUD/USD on Monday will be determined by trader reaction to the short-term Fibonacci level at .7101.

A sustained move over .7101 will indicate the presence of buyers. If this creates enough upside momentum then look for buyers to make a run at .7160. Taking out this price will change the main trend to up with .7178 to .7210 the next likely target zone.

A sustained move under .7101 will signal the presence of sellers. This could trigger a quick break into .7089 to .7087.

Look for an acceleration to the downside if .7087 fails as support. This is a potential trigger point for a steep slide into the minor bottom at .7044 and the main bottom at .7042.

If the AUD/USD is going to rally then it’s going to need help from China’s stock market.