AUD/USD Forex Technical Analysis – October 8, 2014 Forecast

After reaching a 4-year low late last week, the AUD/USD rebounded for a second day on Tuesday, reaching a two-week high at .8833. This rally took out the previous top at .8828, turning the minor trend to up on the daily chart. The lack of follow-through to the upside, however, is a sign that short-covering rather than fresh buying is behind this move.

The catalyst behind the rally was the Reserve Bank of Australia’s monetary policy statement. The central bank said on Tuesday that it would not change the cash rate in the foreseeable future. It also added that it still considered the Australian dollar to be too high despite falling six percent in September.

The next major report is the Employment Change and Unemployment rate on Thursday. Trading volume may be below average on Wednesday as traders position themselves for this number. Analysts estimate the economy lost 29.6K jobs. The unemployment rate is expected to nudge up to 6.2%.

Technically, the main trend is down on the daily chart. It is going to take several more days of consolidation to set up the market for a change in trend.

The minor range is .8642 to .8833. The pivot price created by this range at .8737 is controlling the short-term direction of the market. Trader reaction to this level will set the tone for the day.

If the short-covering rally continues then look for a drive into the downtrending angle at .8941. This is the last resistance before the main retracement zone at .9021 to .9111.

Sellers could press the market under .8737 with the bottom at .8642 the next likely target. The daily chart opens up under this level with a major 50% level from the monthly chart at .8544 the next likely target.

Keep an eye on the price action and order flow if .8737 is tested. This level should determine which way the AUD/USD finishes today.