AUD/USD Forex Technical Analysis – October 21, 2016 Forecast

The AUD/USD is trading slightly higher after Thursday’s sharp break. The move is likely being generated by value-hunters and profit-takers. The catalyst behind yesterday’s move was a surprisingly weak Australian unemployment report that may force the Reserve Bank of Australia to reconsider whether it needs to cut interest rates one more time.

A sharp rise in the U.S. Dollar Index late in the session due to an extremely weak Euro also pressured the Australian Dollar. Also increased chances for a Fed rate hike sooner-rather-than-later after strong U.S. housing data was also supportive for the dollar.

Technical Analysis

The main trend is up according to the daily swing chart. However, momentum changed to down with yesterday’s closing price reversal top and subsequent follow-through move earlier today.

The uptrend will resume on a trade through .7734 and turn down on a trade through .7506.

The main range is .7441 to .7734. Its retracement zone at .7588 to .7553 is the primary downside target and the best support area.

The short-term range is .7506 to .7734. Its retracement zone is .7620 to .7593. The upper or 50% level of this zone was tested successfully today when the market reached an intraday low at .7617.

If the selling continues through .7617 then the next best target is the support cluster formed by these two retracement zones at .7593 to .7588. Watch for a technical bounce on the first test of this area.

Forecast

Based on the current price at .7632 and the earlier price action, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the short-term 50% level at .7620.

A sustained move over .7620 will indicate that buyers are coming in to defend the trend. Overcoming the uptrending angle at .7626 will indicate the buying is getting stronger. This could generate enough upside momentum to challenge the steep downtrending angle at .7654. This is a potential trigger point for a breakout into .7694.

A sustained move under .7620 will signal the presence of sellers. The daily chart opens up to the downside with the next targets .7593 and .7588. This is followed by an uptrending angle at .7566.

Watch the price action and read the order flow at .7620 today. Trader reaction to this level will tell us if buyers are returning or if sellers are maintaining their control.