AUD/USD Monthly Technical Analysis for June 2013

Although the AUD/USD ended April on a high note at 1.0370, the market started May with a sharp sell-off and never looked back, ending the month with a low at .9527 and a close at .9574. The move took out the June 1, 2012 bottom at .9580 and finished in a position to challenge the October 4, 2011 bottom at .9387. With momentum clearly on the downside, it is going to take oversold conditions on the daily chart or a surprise decision by the Reserve Bank of Australia to trigger the start of a reasonable short-covering rally.

The first week of June could see further volatility as the RBA is set to deliver its monetary announcement on June 4. Credit Suisse analysts are forecasting a 17 percent probability of another 25 basis points interest rate cut this month. Bloomberg data also suggests the central bank will refrain from cutting with only 1 out of 25 analysts looking for an interest rate cut to 2.5 percent. With virtually no major news sources looking for a rate cut, the emphasis will shift to the tone of the monetary policy statement. The latest minutes also suggested that the RBA members were poised to take a wait-and-see approach.

If a potential interest rate cut is not likely, then traders are likely to shift their focus on the U.S. Non-Farm Payroll Report expected to be released on Friday, June 7.The early consensus is for an increase of 165,000 jobs. Since this number is below 200,000, it is generally thought that it would hurt chances the Fed would consider reducing its monthly asset-purchases.

This report could move the markets with a slight bias to the upside. Throughout May, U.S. debt yields rose, thereby tightening the spread between Aussie and U.S. debt. This helped drive the AUS/USD lower as investors began to price in the possibility the Federal Reserve would end its aggressive stimulus plan earlier than expected. With the Fed using an improving employment situation as one of the main reasons for tapering its monthly bond purchasing, a lower-than-expected employment number would pressure U.S. yields, thus supporting the AUD/USD.

Technically, with no support according to the monthly chart under 1.0115, the AUD/USD plunged sharply to the major 50% level at .9573. This price was created by the May 2010 bottom at .8067 and the July 2011 top at 1.1080.

Although the market took out the 50% level on May 31, it ran into support on an uptrending Gann angle. This angle moves up to .9547 this month. If downside momentum continues through this angle, then look for an eventual test of the Fibonacci level at .9218.

The Aussie is likely to sit inside the retracement zone bounded by .9573 and .9218 until after the U.S. Employment report on June 7. If the report turns out bearish for the U.S. Dollar then look for the Australian Dollar to post a strong rally from this zone.