AUD/USD Forex Technical Analysis – January 18, 2017 Forecast

The AUD/USD is trading slightly lower on limited volume shortly before the U.S. session. The range is tight and there was no follow-through to the upside following yesterday’s close on the high. The chart pattern suggests investor indecision and impending volatility.

Although the negative effects of Trump’s comments about the U.S. Dollar being “too strong” are still lingering, the main focus today and primary market driver is likely to be the U.S. consumer inflation report at 1330 GMT. Later in the day, investors will get the opportunity to react to a speech on monetary policy by Fed Chair Janet Yellen at 2000 GMT.

Monthly CPI is expected to rise 0.3%. This would put the annualized rate above 2.0% for the first time since the summer of 2014 at 2.1%.

Technical Analysis

The main trend is up according to the daily swing chart. The trend is in no danger of turning down, but it is in the window of time for a closing price reversal top. A break back below the former main top at .7524 will also be a sign that the selling is greater than the buying at current price levels.

The main range is .7777 to .7159. The primary upside target is its retracement zone at .7468 to .7541. Yesterday’s close above this zone is giving the market an upside bias, making both prices new support.

The short-term range is .7159 to .7568. If there is a correction then its retracement zone at .7363 to .7315 will become the primary downside target.

Forecast

Based on the current price at .7552 and the earlier price action, the direction of the AUD/USD today is likely to be determined by trader reaction to the main Fibonacci level at .7541.

A sustained move over .7541 will indicate the presence of buyers. This could generate enough upside momentum to challenge yesterday’s high at .7568. This is a potential trigger point for an acceleration into the next downtrending angle at .7655.

A sustained move under .7541 will signal the presence of sellers.  The next target is the long-term downtrending angle at .7532. Taking out this angle could trigger an acceleration into the major uptrending angle at .7479. This angle has been guiding the market higher for 16 sessions and is very important to the structure of the current rally.

Watch for volatility at 1330 GMT with the release of the CPI number. A stronger than expected number will increase the odds of a Fed rate hike in March. This could encourage investors to take profits, triggering a break.