The risk-sensitive Australian Dollar is trading slightly better on Monday as it tries to recover from last week’s sell-off that drive it into its lowest-level since August 24. The catalysts behind the move are lower U.S. Treasury yields and the easing of fears of widespread contagion from China Evergrande Group.
At 07:23 GMT, the AUD/USD is trading .7277, up 0.0016 or +0.22%.
Last week, the Aussie moved lower after the Federal Reserve announced on Wednesday that it will likely begin to trim its monthly bond purchases as soon as November and flagged interest rate increases may follow sooner than expected, with half of Federal Open Market Committee members projecting a hike next year.
Meanwhile, concerns that China’s second-largest developer Evergrande could default on its $305 billion of debt are receding. This after several local governments in China have set up special custodian accounts for Evergrande property projects to protect funds earmarked for housing projects from being diverted, media outlet Caixin reported on the weekend.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through .7220 will signal a resumption of the downtrend after a four-day counter-trend rally. The main trend changes to up on a move through .7478.
The minor trend is also down. A trade through .7410 will change the minor trend to up. This will also shift momentum to the downside.
The short-term range is .7106 to .7478. The AUD/USD is currently straddling its retracement zone at .7292 to .7248. This zone is controlling the near-term direction of the Forex pair.
The minor range is .7478 to .7220. Its 50% level at .7349 is the primary upside target, followed by the main Fibonacci level at .7379. Since the main trend is down, sellers are likely to come in on a test of this area.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Monday is likely to be determined by trader reaction to .7248.
A sustained move over .7248 will indicate the presence of buyers. This should lead to a test of .7292. Taking out this level will indicate the buying is getting stronger. This could trigger a surge through .7316 with .7349 the next potential upside target.
The inability to overcome .7292 will indicate the presence of sellers. Taking out .7248, however, could trigger a retest of the main bottom at .7220. This is a potential trigger point for an acceleration into the August 20 main bottom at .7106.