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AUD/USD Forex Technical Analysis – July 29, 2016 Forecast

By:
James Hyerczyk
Published: Jul 29, 2016, 03:26 UTC

The AUD/USD is trading higher early Friday as investors brace for the release of the Bank of Japan’s monetary policy statement and stimulus plan.

Australian Dollar

The AUD/USD is trading higher early Friday as investors brace for the release of the Bank of Japan’s monetary policy statement and stimulus plan. According to a Bloomberg survey, 32 of 41 respondents forecast the BoJ will ease monetary policy on Friday. Of the respondents looking for the BoJ to ease, 64% expect further cuts to negative interest rates and 51% foresee an increase in the pace of monetary base expansion.

There is no set time for the BoJ decision. The rule of thumb used by markets is that the longer it takes the BoJ to make its announcement, the more likely it is that the bank has become more creative with its policy decision. If there is a delay, expect market volatility to increase as a consequence.

It’s hard to predict how the AUD/USD will respond to the BoJ decision because there are numerous levels of possibilities. However, the general rule is more stimulus means greater demand for higher risk assets. If there is a rally, gains will be capped because of the high probability of a Reserve Bank of Australia interest rate cut on August 2.

At best, we should see a traders’ market right after the announcement with a strong possibility of a two-sided trade.

Daily AUDUSD

Technically, the main trend is down according to the daily swing chart. However, momentum is to the upside. The upside momentum should continue if .7564 is taken out with conviction. However, the market will be testing a retracement zone on that move. A trade through .7420 will signal a resumption of the downtrend.

Based on the current price at .7527, the first upside target is a 50% level at .7559. This is followed by a high at .7564 and a downtrending angle at .7575.

Overtaking the angle at .7575 will indicate the presence of buyers with the next target the Fibonacci level at .7586. This is the trigger point for an acceleration into the downtrending angle at .7625.

On the downside, the first target is a short-term 50% level at .7492. This is followed closely by another major 50% level at .7480.

Crossing to the weak side of the 50% level at .7480 and the downtrending angle at .7475 will indicate the selling pressure is increasing. This could trigger a further break into the support cluster at .7440 to .7434.

Taking out the Fib level at .7434 will be another sign of weakness with potential targets at .7420, .7410 and .7385.

Daily AUDUSD Short-term

Based on the price action earlier in the week, I have to conclude that the direction of the AUD/USD today will be determined by trader reaction to the short-term pivot at .7492.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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