AUD/USD Forex Technical Analysis – October 6, 2014 Forecast

The AUD/USD took a hit on Friday, following the release of the better-than-expected U.S. Non-Farm Payrolls report. This news increases the chances the Federal Reserve will begin increasing interest rates sooner-than-expected.

Technically, the AUD/USD traded through the January 24 bottom at .8659, making a new low for the year. It did close over back over this level, suggesting weak sell stops were hit. Today, sellers are likely to go after this level with more conviction.

The first downside target is a steep downtrending angle at .8561. Crossing over to the bearish side of this angle should lead to a test of the major multi-year 50% level at .8544. Traders should watch for a technical bounce, following a test of this level.

Holding .8659 will be a sign of short-covering. For some short-sellers, the low for the year at .8659 was their main downside objective. If a short-covering does begin then look for traders to go after the minor top at .8826. A breakout or sustained move over this price could trigger a further rally into the major downtrending angle at .8981.

Fundamentally, sellers took control of the market, following the release of the September jobs report which showed the U.S. economy added 248,000 new jobs versus pre-report estimates of 215,000. The unemployment rate also fell below 6.0%. The news drove up U.S. interest rates which made the U.S. Dollar a more attractive investment than the Australian Dollar.

The strength of the U.S. jobs data is expected to carry over into this week. Additionally, the Reserve Bank of Australia is set to meet on October 7. RBA Governor Glenn Stevens has made several attempts recently to publicly question the valuation of the Australian Dollar, putting a bearish spin on the currency.

The AUD/USD is expected to see more selling pressure this week if Stevens stands his ground. At the last RBA meeting, Stevens said, “The exchange rate remains above most estimates of its fundamental value, particularly given the declines in key commodity prices.” If the RBA continues down this road, look for further price deterioration.

The tone of the market today will be determined by trader reaction to .8659.