AUD/USD Forex Technical Analysis – May 1, 2017 Forecast

End-of-the-month position squaring and profit-taking may have helped boost the AUD/USD on Friday, but the market is still likely to be under pressure over the near-term because the Reserve Bank of Australia is likely to remain neutral on interest rates.

The RBA is not in a position to raise rates because of the weak labor market and it’s not likely to lower rates any time soon because of the overheated housing market. So for the time being, it is going to have to wait to make a move.

I expect the central bank to say something like this when it releases its latest monetary policy statement later this week.

Although there is a strong downside bias, we could continue to see counter-trend price action because of oversold conditions and more position-squaring ahead of the RBA meeting.

Technical Analysis

The main trend is down according to the daily swing chart. The market is far from turning the main trend to up, but it is in the window of time to produce a potentially bullish closing price reversal bottom.

The nearest downside targets are a pair of long-term 50% levels at .7468 and .7454. This is followed by last week’s low at .7440. The next major support is a Fibonacci level at .7384.

The new short-term range is .7610 to .7440. Its retracement zone at .7525 to .7545 is the primary upside target. This zone also surrounds a long-term Fibonacci level at .7541. The best resistance cluster is .7541 to .7545. Since the main trend is down, sellers are likely to come in on a test of the zone.

Forecast

Based on Friday’s close at .7486, the nearest potential support is .7468, .7454 and .7440. If .7440 fails as support and the selling volume starts to increase then we could see an acceleration into the Fib level at .7384.

The daily chart suggests that taking out .7492 could trigger some buy stops. If the short-covering continues then we could see an acceleration into the downtrending angle at .7520. This is followed by a 50% level at .7525.

If we see a rally today, then it is likely to be fueled by short-covering since I don’t think buyers are ready to step in ahead of the RBA meeting, given the bearish fundamentals.