AUD/USD Monthly Technical Analysis for November 2014

Sellers continued to hit the AUD/USD early in October, but by the end of the month, the Aussie managed to close higher versus the U.S. Dollar. The strength at the end of the month is likely to be short-lived, however.

The fundamentals support a stronger U.S. Dollar based on expectations of an interest rate hike in 2015 by the Fed. Last month, the U.S. Federal Open Market Committee issued an upbeat assessment of the U.S. labor market. After its two-day meeting, it said the jobs market had enjoyed “substantial improvement” and that it expected its underlying strength to continue.

Although the Fed reiterated that it will not raise its benchmark rate for a “considerable time”, as the U.S. economy improves, the chances of an interest rate hike gets closer. The slightly hawkish language by the Fed also suggests the Fed seems more willing to raise rates than in previous meetings.

Technically, oversold conditions rather than a change in the fundamentals led to last month’s higher close. Early in the month, the Aussie took out .8659 before buyers came in at .8642 to support the market. This was most likely short-covering since the fundamentals support lower prices.

The main range is .6008 to 1.1080. Its retracement zone at .8544 to .7945 is the next major downside target. Before the market reached a low at .8642 in October, it seemed to be headed for an acceleration into the upper or 50% level at .8544. This price remains the first important downside target.

This month, the AUD/USD is expected to open with a slight upside bias because it is currently on the strong side of a downtrending angle at .8716. This trend will continue throughout the month unless this price is taken out with conviction. Crossing to the weak side of this angle will be the first sign of weakness.

The tone of the market this month is likely to be determined by trader reaction to the downtrending angle at .8716.