AUD/USD at the Crossroad, Awaiting FOMC Minutes and NFP

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AUD/USD at the Crossroad, Awaiting FOMC Minutes and NFP

AUD/USD has been bearish since June 2014. It remains bearish, but has rebounded this week. Let’s take a look at the charts and assess whether we might be seeing a shift in trend.

AUD/USD Daily Chart 1/6
aud daily chart
(click to enlarge)

Now, starting with the daily chart. we can see that the latest bearish candle was a strong one, and should signal bearish continuation. However, the AUD/USD has been fighting this week, creating a bullish divergence in the daily chart. We are at the crossroad between a possible consolidation/correction and the bearish continuation scenario. The favored scenario is always the prevailing one, which is bearish.

AUD/USD 4H Chart 1/6
audusd 4h chart 1/6
(click to enlarge)

The 4H chart also suggests bearish continuation with price holding below the 100-, and 50-period SMA. we can also say that this week’s rally so far is a pullback against last week’s bearish breakout, and it is so far respecting a support/resistance pivot in the 0.8150-0.8160 area.

AUD/USD 1H Chart 1/6
audusd 1h chart 1/6
(click to enalrge)

The 1H chart shows that price is breaking down a rising speedline from last week’s low. Price action did violate some key resistance factors, but did not show any strong bullish signal. It is however showing bearish bias. The AUD/USD is still at the crossroad, but if it breaks below 0.8095, it will revive the bearish outlook, and put pressure on the 0.8040 low, with risk of breaking towards 0.80.

FOMC minutes and NFP: 

The 2 key fundamental factors for AUD/USD will be from the USD-side. FOMC minutes will be released on Wednesday. It is likely to reveal positive outlook and reaffirm the recent projection of the Fed to raise rates before mid-2015. If so, the AUD/USD should remain pressured. However, we should note if the minutes do not keep price below 0.81, there is resilience in the pair.

The NFP is expected to show 241K jobs added in December. This would be a decent number early in 2014, but readings above 250K will be needed now to keep USD-strength going. A reading above 300K is most likely to keep AUD/USD bearish. But a reading around the 240K forecast might not be impressive enough.

So, again, let’s watch for the reaction after the NFP. If the week can close above 0.81, the AUD/USD has a good chance of making a bullish correction next week, with pressure towards the 0.8215 high. A break above 0.8215 will be needed to introduce the bullish correction scenario.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.