AUD/USD – Trading the RBA Statement and NFP Report

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AUD/USD - Trading the RBA Statement and NFP Report

The AUD/USD took another step in the bearish direction this week, falling below the October consolidation range. It started last week when the FOMC announced the end of QE, and AUD/USD fell from the consolidation resistance around 0.89. This week, AUD/USD continued lower after a slew of economic data, which were middle of the road and nothing very surprising. The RBA held its official cash rate at 2.50%, and is due to release its RBA interest rate statement during the 11/7 Asian session. This is the the next fundamental factor for the AUD/USD, but Friday’s NFP might be even more important from the USD-side.

AUD/USD 4H Chart 11/7
audusd 4h chart 11/6
(click to enlarge)

The 4H AUD/USD chart shows a market in bearish continuation mode. However, it might be a tad oversold in the short-term. Let’s take the RBA statement and NFP events as one consolidated fundamental risk and assess the reaction after the NFP.

Dealing with the Fundamental Risk:

At this point, if AUD/USD pulls back, a bearish market has 2 lines of defense. First is the 0.8650-0.8675 support area of the previous consolidation range that is probably reinforced by a falling speedline.

If the NFP is strong, then the USD should be strong, and the AUD/USD should hold below these resistance factors. IF the NFP is strong, but AUD/USD still pushes above this resistance, we should be cautious with the bearish outlook because this would show AUD-resilience.

Then, the second zone of resistance is in the 0.8750-0.8775 area. This represents the central pivot of the October consolidation range, the high of this week, and a cluster of moving averages. If the RSI is back at 60 as well, we should anticipate a bearish attempt from here. A break above 0.8750 however, might shift the bearish outlook back to a neutral one.

Now, if the NFP is weak, then the USD might be weak. If the AUD/USD is able to break back above 0.8750, then we can expect further consolidation like we had in October. However, if NFP is weak, and AUD/USD rallies but holds below 0.8750, it might be an opportunity for sellers to hop on again. If price then falls back below 0.87, look for a bearish continuation attempt that has the 0.8550, then the 0.85 handle in sight in the short-term.

AUD/USD Daily Chart 11/6
audusddaily11062014
(click to enlarge)

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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.