The Australian Dollar finished higher on Friday, powered by a combination of strong domestic retail sales data and U.S. data that eased fears over a possible recession fueled by a series of aggressive Federal Reserve interest rate hikes.

On Friday, the AUD/USD settled at .7161, up 0.0061 or +0.86%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) closed at $70.89, up $0.64 or +0.91%.

Australian retailers recorded a fourth consecutive month of sales gains, suggesting households are so far weathering a spike in the cost of living from surging fuel and other prices.

The U.S. Dollar weakened on Friday as traders lowered Federal Reserve rate hike expectations amid signs the central bank might slow or even pause its tightening cycle in the second half of the year.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through .7266 will change the main trend to up. A move through .6829 will signal a resumption of the downtrend.

The minor range is up. This is controlling the momentum. A trade through .7167 will single a resumption of the trend. A move through .7035 will change the minor trend to down.

The short-term range is .7266 to .6829. Its retracement zone at .7099 to .7047 is support.

The minor range is .6829 to .7167. If the minor trend changes to down then its retracement zone at .6998 to .6958 will become the next support area.

The intermediate range is .7458 to .6829. The AUD/USD closed inside its retracement zone at .7143 to .7218.

The main range is .7661 to .6829. Its retracement zone at .7245 to .7343 is the primary upside target area of this current rally.

Short-Term Outlook

Trader reaction to the intermediate 50% level at .7143 will determine the direction of the AUD/USD early Monday.

Bullish Scenario

A sustained move over .7144 will indicate the presence of buyers. This could trigger an early surge next week into a Fibonacci level at .7218, a 50% level at .7245 and the main top at .7266. A trade through this level will change the main trend to up with the main Fibonacci level at .7343 the next target.

Story continues

Bearish Scenario

A sustained move under .7144 will signal the presence of sellers. This could lead to a short-term pullback into a Fibonacci level at .7099 and a 50% level at .7047. These are the last potential support levels before the minor bottom at .7035.

Side Notes

The big questions are:  Will bullish traders chase the AUD/USD higher this close to the main top at .7266 and the major 50% to 61.8% retracement zone at .7245 – .7343, or will long-term buyers wait for a pullback into the value area at .6998 to .6958?

In my opinion, the current rally from .6829 has been mostly short-covering. We haven’t seen a pullback into support that typically leads to the formation of a secondary higher bottom after attracting real buyers.

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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