AUD/USD Gives Back Early Gains Amid Drop in Demand for Risky Assets

The Australian Dollar is trading lower late in the session on Friday after giving up earlier gains. The currency was up most of the day after short-sellers covered amid weakness in the U.S. Dollar.

However, prices started to retreat after the mid-session as U.S. stocks began to fall, dampening demand for higher-risk, higher-yielding assets. The commodity-linked currency was also pressured after gold gave back some of its gains and crude oil turned lower for the day.

At 20:02 GMT, the AUD/USD is at .7065, down 0.0035 or -0.49%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.07, down 0.35 or -0.50%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the February 4 main bottom at .7955 will reaffirm the downtrend.

A move through .7458 will change the main trend to up. This is highly unlikely, but the Forex pair is getting close to entering the window of time for a potentially bullish closing price reversal bottom.

The minor trend is also down. A trade through .7055 will reaffirm the minor trend. This will make .7180 a new minor top.

The minor range is .7458 to .7055. If the minor trend changes to up then look for a surge into its retracement zone at .7257 to .7304.

Short-Term Outlook

Aussie traders are shrugging off the possibility of a 25-basis point rate hike at the May Reserve Bank of Australia (RBA) meeting since the Federal Reserve is widely expected to hike its benchmark rate 50-basis points.

In the meantime, the primary focus appears to be on the COVID-related lockdowns in China that could start weighing on its economic growth. The fear for Aussie traders is that the slow growth in China spreads to Australia.

Worries about a slow economy has also spread to the United States after a report earlier in the week showed a first-quarter contraction in the economy. On top of this, inflation is still running hot. Both factors are contributing to the drop in demand for riskier assets like the AUD/USD.