AUD/USD Forex Technical Analysis – October 25, 2016 Forecast

The AUD/USD found support earlier in the session at the same 50% level that provided support on Monday and Friday. This indicates the presence of a strong buyer who is not likely to lift his buy order unless Wednesday’s Australian Consumer Inflation report is bearish.

There was no domestic data released during the Asian session, but the Aussie caught a bid against the U.S. Dollar on technical buying related to the chart pattern.

On Monday, the Aussie traded inside Friday’s range despite a stronger Greenback that was supported by higher Treasury yields and more hawkish talk from a Fed official. Chicago Fed President Charles Evans said on Monday the Fed could raise rates three times between now and the end of 2017, so long as inflation expectations and the labor market continue to improve.

There is a slew of U.S. economic reports on Tuesday, however, the majority of them are minor and not likely to move the dollar much. They include the Home Price Index, the S&P/CS Composite-20 HPI, the IBD/TIPP Economic Optimism and the Richmond Manufacturing Index.

The major report is Conference Board Consumer Confidence, which is expected to come in at 101.5, down from 104.1. The index is forecast to come in lower because of consumer worries about Hurricane Matthew last month and the November election. This report should not sway the Fed’s interest rate decision either way.

Looking ahead, on Wednesday, Australian Quarterly Consumer Inflation is expected to come in at 0.5%, up from the previous 0.4%.  The next two key U.S. reports are Durable Goods and most importantly, Friday’s Advance GDP.

Technical Analysis

The main trend is up according to the daily swing chart. The trend will resume on a trade through .7734. A move through .7506 will turn the main trend to down.

The main range is .7441 to .7734. Its retracement zone at .7588 to .7553 is the primary downside target. Its upper or 50% level at .7588 has provided solid support the last three days.

The short-term range is .7506 to .7734. Its retracement zone at .7620 to .7598 is the short-term target.

The combination of the two retracement zones creates the best support zone at .7598 to .7588. This is the area that held as support and encouraged the buying.

If a short-term range forms between .7734 and .7587 then its retracement zone at .7660 to .7678 will be the primary upside target.

Forecast

Another successful test of .7588 earlier in the session created enough upside momentum to trigger a strong rally through a key price cluster at .7614 to .7620.

If the upside momentum continues then look for the rally to extend into at least .7660, followed by a cluster of numbers at .7666, .7674 and .7678. Taking out .7678 could trigger an acceleration into .7586.