The Australian Dollar continues to be underpinned by expectations for a 25-basis point rate cut by the Federal Reserve on July 31. Some support is also being provided by the 30% chance of a 50-basis point rate cut. Hedge fund traders are also taking advantage of the carry trade by borrowing cheap Swiss Francs and Euros and buying the higher-yielding Aussie Dollar.
At 08:50 GMT, the AUD/USD is trading .7031, up 0.0010 or +0.13%.
Earlier in the session, the Australian Dollar received a boost from stronger-than-expected economic data from China. China’s industrial output rebounded in June from a 17-year low in the previous month. June retail sales surged 9.8% from a year earlier, compared with the 8.5% estimate and 8.6% previous reading.
The buying could slow later in the week with the release of the minutes of the Reserve Bank of Australia’s (RBA) on Tuesday, and reports on Employment Change and Unemployment.
Daily Technical Analysis
The main trend is up according to the daily swing chart. A trade through .7048 will signal a resumption of the uptrend. The main trend will change to down on a move through .6911.
The AUD/USD is also testing a major retracement zone at .7019 to .7063. This zone stopped the rally on July 4 at .7048.
The short-term range is .7048 to .6911. Its retracement zone at .6996 to .6979 is potential support.
Daily Technical Forecast
Based on the early price action and the current price at .7031, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the Gann angle cluster at .7031.
A sustained move over .7031 will signal the presence of buyers. The next target angle is .7039. This is the last potential resistance angle before the .7048 and the main Fibonacci level at .7063.
A sustained move under .7031 will indicate the presence of sellers. This could drive the AUD/USD into the main 50% level at .7019. This is followed by a downtrending Gann angle at .7013.
The angle at .7013 is a potential trigger point for an acceleration to the downside with the next target the short-term Fibonacci level at .6996.
This article was originally posted on FX Empire
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