AUD/USD Forex Technical Analysis – October 2, 2014 Forecast

Buyers came in on Wednesday as the AUD/USD approached the January 24 bottom at .8659, triggering a rebound rally after testing .8662. The rally into the close was impressive, but the market failed to close higher for the session. It also came close to producing a closing price reversal bottom which would have been potentially bullish for the Forex pair.

For the second consecutive day, the AUD/USD close above a long, downtrending angle from the .9401 top. This is a strong sign of aggressive buying and short-covering. The angle drops down today to .8641. Crossing back under this angle will put the market in a weak position.

If there is a follow-through rally today then look for a test of .8770 early in the session. Trader reaction to this number will set the tone for the day.

Taking out .8770 and sustaining a rally above this angle will indicate the short-covering is getting stronger. The daily chart indicates there is room to the upside with the next upside target coming in at .8882.

Watch the price action and order flow at .8770. This will tell you which way the market is likely to move. If the low of the year is taken out at .8659 with conviction then look for the market to accelerate to the downside. The next major downside target is the May 2010 bottom at .8067.