AUD/USD Set to Make Major Forex Correction – April 24, 2014

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AUD/USD Set to Make Major Forex Correction - April 24, 2014AUD/USD suffered a sharp forex correction in yesterday’s trading sessions when the quarterly CPI from Australia came in below expectations. The report showed a 0.6% increase in inflation when analysts were expecting to see a 0.8% rise in price levels. This pushed AUD/USD down from the .9380 area down to the .9300 major psychological support zone.

As you can see from the pair’s 4-hour time frame, price is finding a floor at the 50% Fibonacci retracement level, which lines up with an area of interest. A rally from this area could lead to a test of the previous highs if there’s enough buying momentum spurred by an economic catalyst.

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Forex Correction Forecast for AUD/USD

A deeper forex correction could reach all the way down to the 61.8% Fibonacci retracement zone, which is closer in line to the rising trend support connecting the price’s lows since January this year. A bounce from the ascending trend line could confirm that the uptrend is still valid and that the fundamental bias still favors the Australian dollar over the US dollar in the meantime.

There are no major reports due from the US today, except perhaps for the initial jobless claims and the durable goods orders data. Bear in mind that the US economy has been printing disappointing figures lately, with the flash manufacturing PMI showing a slight decline and existing home sales falling short of consensus. This leads to a bearish bias for the dollar, although the safe-haven currency is currently drawing a bit of support from the risk-off market environment. While this persists, AUD/USD could make its way lower to make an actual test of the ascending trend line.

Australian banks are on a holiday in observation of Anzac day, which could mean a bit of consolidation for Aussie pairs. Traders could take this time to reestablish their Aussie positions and assess the monetary policy and interest rate divergences between Australia and the US.

To contact the reporter of the story: Marco Roemer at marco@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.