The Australian Dollar closed marginally higher on Friday but prices continued to retreat from a 15-month peak against the greenback as investors grew more worried over escalating tensions between the United States and China, and growing signs of a worsening coronavirus pandemic, which could lead to a deeper than expected economic recession in Australia.
On Friday, the AUD/USD settled at .7106, up 0.0010 or +0.14%.
Friday’s price action capped a volatile week of trading amid rising tensions between China and the U.S. China is Australia’s biggest trading partner.
China ordered the closure of a U.S. consulate in Chengdu, retaliating after Washington shut the Chinese consulate in Houston earlier in the week.
U.S.-China ties have deteriorated this year over issues ranging from the new coronavirus and telecoms gear maker Huawei, to China’s territorial claims in the South China Sea and Hong Kong crackdown.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through .7182 will signal a resumption of the uptrend. The main trend will change to down on a move through the nearest main bottom at .6833.
The minor trend is also up. A trade through .6963 will change the minor trend to down. This will also shift momentum to the downside.
The minor range is .7182 to .7064. Its 50% level at .7123 is potential resistance.
The second minor range is .6963 to .6182. Its retracement zone at .7072 to .7047 is potential support. It stopped the selling at .7064 on Friday.
The short-term range is .6833 to .7182. Its retracement zone at .7007 to .6966 is the best support area, and potential trigger point for an acceleration to the downside.
The strong uptrend and series of retracement levels suggest the current correction is going to be a labored event. Buyers are likely to come in on tests of these levels.
The big worry for bullish traders should be risk sentiment. The weakness on Thursday and Friday is worrisome become it took place while the U.S. Dollar Index was plunging to a two-year low. This suggests the Aussie is more sensitive to falling risk sentiment rather than the direction of the U.S. Dollar.
This also indicates that traders should watch the stock market for direction.
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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