AUD/USD Forex Technical Analysis – August 25, 2015 Forecast

The rout in the global equity markets drove the AUD/USD sharply lower on Monday in a volatile session. The turbulence subsided early Tuesday, leading to a slight rebound. Relatively calm markets in Japan and South Korean, two key trading partners, helped stabilize the markets despite the continued sell-off in Chinese stocks.

Although many investors now feel the Fed will further delay its first interest rate cut since 2006, the Aussie has not responded to the weaker U.S. Dollar. Instead, it has sold-off in anticipation of a possible recession in China, its biggest trading partner. Also driving the market lower are increased chances of another 25 basis point interest rate deduction by the Reserve Bank of Australia. Traders have increased bets of another rate cut by November to 76 percent.

Technically, the main trend is down on the daily chart. Yesterday’s sell-off through .7215 reaffirmed the downtrend.

The AUD/USD is rebounding in Tuesday’s session. The first upside target is a downtrending angle at .7239. Trader reaction to this angle will determine the direction of the Forex pair the rest of the session.

Overtaking .7239 and sustaining the move could trigger further upside action with an angle at .7339 the next potential target.

A failure to overcome .7239 will signal the presence of sellers. If they successfully defend this angle and increase the selling pressure then look for a drive towards yesterday’s low at .7090. The next target under this figures is a steep downtrending angle at .7039. Increased selling under this angle could trigger another steep sell-off into the next target at .6956.

Watch the price action and read the order flow on a test of .7239 if possible. This will tell us whether the bulls or the bears are in control.