AUD/USD Forex Technical Analysis – .7243 Pivot Capping Gains with .7106 Next Major Downside Target

The Australian Dollar is trading lower Friday after failing to follow-through to the upside following yesterday’s strong rally. A combination of factors is weighing on the Aussie early in the session including a slight rise in U.S. Treasury yields and the U.S. Dollar, weaker demand for higher risk assets and lower commodity prices.

At 07:45 GMT, the AUD/USD is trading .7205, down 0.0020 or -0.28%.

Stock futures fell in early morning trading on Friday after the S&P 500 notched its worst month since March 2020. Futures on the Dow Jones Industrial Average dropped 224 points. S&P 500 futures and NASDAQ 100 futures both traded in negative territory and pointed to opening losses. Earlier, Dow futures had plunged around 300 points. This weakness in demand for risk was enough to weigh on the Aussie.

Later today, traders will get the opportunity to react to two major U.S. releases: Core PCE Price Index and ISM Manufacturing PMI. Both are capable of triggering a volatile response by Aussie traders.

Core PCE Price Index will be released at 12:30 GMT. It is expected to show inflation rose 0.2% last month. The ISM Manufacturing PMI report, due out at 14:00, is expected to come in at 59.6, slightly below the previously reported 59.9.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7170 will signal a resumption of the downtrend. A move through .7316 will change the main trend to up.

The minor range is .7316 to .7170. Its 50% level or pivot at .7243 is resistance. This level stopped the selling earlier in the session.

The short-term 50% level at .7324 is another potential resistance level.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Friday is likely to be determined by trader reaction to the pivot at .7243.

Bearish Scenario

A sustained move under .7243 will indicate the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into this week’s low at .7170. Taking out this level could trigger an acceleration into the August 20 main bottom at .7106.

Bullish Scenario

A sustained move over .7243 will signal the presence of buyers. If this move creates enough upside momentum then look for a test of last week’s close at .7261.

Overtaking .7261 will put the AUD/USD higher for the week. This could shift momentum to the upside next week with .7316 – .7324 the next target zone.