AUD/USD Forex Technical Analysis – October 1, 2014 Forecast

AUD/USD traders survived a test of the January 24 bottom at .8659 on Monday. The strong rebound rally suggests that Friday’s break to .8642 may have been triggered by sell-stops rather than fresh shorting. Based on yesterday’s action, anyone who went short on the move through .8659 was caught in a bear trap and may have to chase the market to the upside if buyers start to come in to support the market. This could produce a volatile short-covering rally.

The main trend is down on the daily chart. The main range is .9401 to .8642. Its retracement zone at .9021 to .9111 is the next major upside target should a strong short-covering rally ensue.

The minor trend is also down. The minor range is .8826 to .8642. Its pivot at .8734 is controlling the short-term direction of the market. Taking out .8826 will turn the minor trend up on the daily chart.

The first upside objective on a breakout rally is the downtrending angle at .8961. This is followed closely by the 50% level at .9021.

A sustained move under the pivot at .8734 will be a sign of weakness. This could trigger another test of the bottom at .8659. If this price fails, sellers should drive the market into last week’s low at .8642.

Momentum may begin to increase at this point since the daily chart indicates there is plenty of room to the downside. The first downside target is a major 50% level at .8544, followed by a steep downtrending angle at .8521.

The tone of the market is likely to be determined by trader reaction to .8734.