AUD/USD Forex Technical Analysis – March 18, 2016 Forecast

The AUD/USD continued to soar Thursday/Friday, reaching a nine-month high on the back of the U.S. Federal Reserve’s dovish comments about interest rates.

To recap, the Fed held interest rates steady on Thursday in a widely expected move. But the central bank indicated it would hike rates only twice this year, down from an earlier projection of four times.

With the U.S. Dollar dropping to a five-month low on the news, the price of U.S. dollar-priced commodities such as iron ore and crude oil soared. This helped the commodity-linked Australian Dollar. It also may cause a headache for the Reserve Bank of Australia, whose inflation forecasts are now under threat. This could hurt the growing services and tourism boom in the country, but also threatens the RBA’s inflation forecasts.

The RBA emphasized that inflation is likely to be the main driver of any further rate cuts in their minutes released on March 15.

The longer the AUD/USD spends above .7600 the greater the chance RBA officials will try to talk the currency lower so be prepared for periodic reversals to the downside.

We are at such a critical area that it is suggested you start watching the daily and weekly charts.

Technically, the main trend is up according to the daily swing chart. It won’t turn down unless the swing bottom at .7414 is violated. However, it is in the window of price and time for a potentially bearish closing price reversal top.

The current price action suggests that one may be forming today. We’ve had the higher-high. Now all we need is the lower close, close below the opening and a close below the mid-point of the day’s range. This could trigger the start of a 2 to 3 day break early next week.

The main trend is also up on the weekly chart. Its main range is .8162 to .6826. Its retracement zone is .7494 to .7652. The AUD/USD is currently testing this zone. This is the key area to watch for selling pressure to emerge especially if the RBA members start to warn about the damage a high-priced currency could do.

If upside momentum continues then the market could stretch to the Fib level at .7652 or even a long-term downtrending angle at .7732.

The key area to watch on the chart is the daily/weekly combination at .7494. This is followed by .7466.

It’s probably a good time to start thinking about an exit strategy so consider moving up protective stops. Start watching for signs of a top on the intraday/daily charts.