AUD/USD Forex Technical Analysis – May 17, 2016 Forecast

The AUD/USD is trading higher, but giving up earlier gains. The market is mirroring the price action in the crude oil market.

On Monday, the Australian Dollar was the biggest climber among the major currencies, gaining as much as 1.2 percent against its U.S. counter-part.

The Forex pair was supported early Monday by rallying oil prices, but received a further boost by minutes from the Reserve Bank of Australia’s (RBA), which tempered expectations of an interest rate cut.

Traders said the Aussie is pulling the other commodity currencies up. The expectation was that the minutes of the RBA meeting would have set us up for another cut in June, and that was very much not the case. I believe the consumer inflation report due out in late July is going to determine whether there is going to be an August rate cut. I never felt the urgency for a June rate cut.

Technically, the main trend is down according to the daily swing chart. Yesterday’s closing price reversal bottom did not come as a surprise since the Forex pair began the week inside a major retracement zone and was in the “window of time” to reverse direction because of the prolonged move down in price and time.

The chart pattern doesn’t mean the trend is getting ready to turn higher, but could trigger the start of a 2 to 3 day rally into a retracement zone. It is primary designed to alleviate some of the selling pressure and allow bearish investors to re-short at more favorable price levels.

The main range is .6826 to .7834. Its retracement zone at .7330 to .7211 is the primary downside target and potential support zone. Yesterday’s low at .7244 occurred inside the zone. Yesterday’s closing price reversal bottom is also the second such pattern to develop over the last 5 days which suggests buyers are coming in to support the market. They could be aggressive, counter-trend buyers or profit-takers.

The new short-term range is .7834 to .7244. Its retracement zone at .7539 to .7609 is the primary upside target.

Based on yesterday’s close at .7289 and the earlier price action, the direction of the market is likely to be determined by trader reaction to .7308.

Taking out .7308 earlier confirmed the closing price reversal bottom. It also created enough upside momentum to overcome the uptrending angle at .7323 and the major 50% level at .7330.

A sustained move over .7330 could trigger an acceleration into the next long-term uptrending angle at .7387. This is another trigger point for an acceleration into the downtrending angle at .7474.

A break back under .7308 will indicate the presence of sellers. This could trigger a further break into the next uptrending angle at .7261. This is followed by the closing price reversal bottom at .7244.

Taking out .7244 will negate the chart pattern and could trigger a further break into the major Fibonacci level at .7211.

Based on the current price at .7328, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the major 50% level at .7330.