AUD/USD Forex Technical Analysis – October 4, 2017 Forecast

The AUD/USD is trading higher early Wednesday. There were no major changes in the fundamentals so the price action is likely related to position-squaring ahead of today’s economic reports, Fed Chair Janet Yellen’s speech and Friday’s U.S. Non-Farm Payrolls report.

One issue that developed late Tuesday was concern over President Trump’s selection for Fed Chair Janet Yellen’s successor. Some traders are speculating that U.S. President Donald Trump’s choice for the next Fed chair could be a less hawkish candidate than some had expected.

According to Politico, U.S. Treasury Secretary Steven Mnuchin favors Fed Governor Jerome Powell over former governor Kevin Marsh. Powell is seen as more dovish than Warsh, who has criticized the Fed’s bond-buying program in the past. A more hawkish Fed candidate would likely drive the U.S. Dollar higher.

A dovish candidate would be bearish for the U.S. Dollar.

Daily Technical Analysis

The main trend is down according to the daily swing chart, however, yesterday’s closing price reversal bottom and today’s subsequent confirmation has signaled a shift in momentum to the upside.

A trade through .7785 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The rally started inside a major retracement zone, bounded by .7847 to .7782. This zone is new support. It is controlling the longer-term direction of the AUD/USD. If it fails then look out to the downside.

The main range is .8102 to .7785. If the short-covering rally gains traction then its retracement zone at .7943 to .7981 will become the primary upside target.

Daily Forecast

Based on the current price at .7856 (0800 GMT) and the earlier price action, 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 .7847.

A sustained move over .7847 will signal the presence of buyers. This could generate enough upside momentum to challenge a resistance cluster at .7897 to .7902. Overtaking this area will likely lead to a rally into .7943.

A sustained move under .7847 will indicate the presence of sellers. This could trigger a break into a series of uptrending Gann angles at .7825, .7805 and .7795.

The first leg up after a prolonged move down is usually short-covering. The pullback into the uptrending Gann angles may be necessary to establish a new higher bottom. The key to the developing rally is holding yesterday’s low at .7785.