AUD/USD Forex Technical Analysis – May 3, 2016 Forecast

The AUD/USD is trading sharply lower after the Reserve Bank of Australia cut its official cash rate by 25 basis points to a historic low of 1.75 percent, in an effort to head off fears about deflation. It is the first change in interest rates since May last year, when rates were cut 25 basis points to 2 percent.

The Australian Dollar immediately tumbled 1 percent to below 76 cents against the U.S. Dollar in response to the cut.

In a statement accompanying the decision, RBA governor Glenn Stevens pointed to the unexpectedly weak inflation data as the reason behind the move.

“While the quarterly data contain some temporary factors, these results, together with ongoing, very subdued growth in labor costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast,” Mr. Stevens said.

Technically, the main trend is up according to the daily swing chart, however, momentum has clearly shifted to the downside. The main trend will turn down on a break through the previous main bottom at .7491.

The AUD/USD is trading at .7561, which puts it on the weak side of a series of uptrending angles at .7567, .7573 and .7596. These angles should now be treated as resistance. Additionally, the major Fibonacci level at .7608 is also a potential resistance level.

The next price sellers are likely to go after is last week’s low at .7548. This could trigger an acceleration to the downside with the main bottom at .7491 the next target, followed by the major 50% level at .7450.

The fundamentals are bearish and the chart pattern just turned bearish. It’s just a matter of time before enough sellers come in to drive the AUD/USD lower. The key to lower prices is a sustained move under the three main angles ranging from .7567 to .7596.