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The Australian Dollar is edging higher early Monday after falling to new 2-1/2-lows last week. Coming in the wake of the United States’ highest inflation reading in 40 years and expectation of another 75-basis point rate hike by the Federal Reserve on November 2, the price action suggests the news has already been priced into the Aussie.
Furthermore, we could be looking at some position-squaring ahead of Tuesday’s slew of economic data from China and the release of the RBA’s monetary policy meeting minutes. Australia is also expected to release key data on Employment Change and the Unemployment Rate on Thursday.
At 04:58 GMT, the AUD/USD is trading .6230, up 0.0028 or +0.46%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $61.41, down $0.90 or -1.44%.
In the U.S. on Monday, traders will get the opportunity to react to the release of the Empire State Manufacturing Index. Last month, the index came in at -1.5, which was actually an increase from the previous month’s -31.3. Traders are price in a reading of -4.3.
A lower reading should catch the eye of Federal Reserve officials who are looking to slow down economic growth in order to tame stubbornly high inflation.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, the confirmation of last Thursday’s closing price reversal bottom suggests momentum may be getting ready to shift to the upside.
A trade through .6170 will negate the chart pattern and signal a resumption of the downtrend, while a trade through .6548 will change the main trend to up.
The minor range is .6170 to .6347. Its pivot at .6259 is the nearest resistance.
The short-term range is .6548 to .6170. Its 50% retracement level comes in at .6359.
The major resistance controlling the longer-term direction of the AUD/USD comes in at .6466.
Daily Swing Chart Technical Forecast
Trader reaction to the minor pivot at .6259 is likely to determine the direction of the AUD/USD on Monday.
Bearish Scenario
A sustained move under .6258 will indicate the presence of sellers. If this creates enough downside momentum then look for a break into the minor bottom at .6170.
Taking out .6170 will reaffirm the downtrend. It is also the trigger point for an acceleration to the downside with the April 3, 2020 main bottom at .5980 the next major target.
Bullish Scenario
A sustained move over .6259 will signal the presence. If this generates enough upside momentum then look for a possible surge into the resistance cluster at .6347 to .6359.
Sellers could come in on the first test of .6359, but overcoming it could trigger a countertrend surge into the major resistance at .6466.
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