AUD/USD Forex Technical Analysis – Traders Waiting to Respond to China’s Trade Balance Report

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The Australian Dollar is edging lower against its U.S. counterpart early Monday as traders await the release of a key Trade Balance report from China later in the session.

On Friday, the Aussie surged against the greenback after a greater-than-expected rise in the U.S. employment rate led to increased speculation the Federal Reserve would slowdown the pace of future rate hikes.

At 02:40 GMT, the AUD/USD is trading .6418, down 0.0050 or -0.77%. On Friday, the Invesco Currency Shares Australian Dollar Trust ETF (FXA) settled at $64.07, up $1.77 or +2.85%.

Economic Data on Tap

China’s Trade Balance is expected to increase to 702B, up from 574B. In U.S. Dollar denominated terms this mean $96.0B versus $84.7B. RBA Governor Lowe is expected to speak on Tuesday.

The major macro event is the U.S. congressional elections on Tuesday/Wednesday. This is important because they could shift the power in Washington to the Republicans which would have a major impact on U.S. policy.

The major economic news will be Thursday’s U.S. Consumer Price Index (CPI) report. It is expected to show a monthly increase of 0.6%. However, annual inflation is expected to have dipped to 8.0%. A lower than expected reading could increase the chances of the Fed slowing the pace of its rate hikes. This could give the AUD/USD a boost.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6492 will change the main trend to up. A move through .6272 will trigger a resumption of the downtrend.

On the upside, the major resistance is the long-term Fibonacci level at .6466. This is followed by a retracement zone at .6543 to .6631.

On the downside, minor support is a pivot at .6397. This is followed by a short-term 50% level at .6346.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at .6397 is likely to determine the direction of the AUD/USD early Monday.

Bullish Scenario

A sustained move over .6397 will indicate the presence of buyers. The first upside target is .6466.

Overtaking .6466 will indicate the buying is getting stronger. This could trigger a break out over the main top at .6492 with a main top at .6522 the next target, followed by the major Fibonacci level at .6466.

Bearish Scenario

A sustained move under .6397 will signal the presence of sellers. This could trigger a break into .6346. Look for an acceleration into the minor bottom at .6272 if .6346 fails as support.