Forex Technical Update

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The AUD/USD has been falling precipitously since the RBA cut rates by 50 basis points off the official cash rate, more than the market's expectation of 25bps as seen in the ForexFactory economic calendar. The 5/4 NFP added to USD strength from risk aversion flow. Uncertainty in the eurozone and slowdown in China are also factors that has been weighing on the AUD/USD.


The next risk factor is Australia's April employment data, coming out 9:30PM EDT. As the 5/9 US session concludes and the AUD/USD approaches the parity level we start to see some initial signs of deceleration in the 4H chart.

There was an outside bar before the current one, expressing support just above the 1.00 level. The RSI reading falling below 30 was a sign of strong bearish momentum, but the bullish divergence with price is a sign of short-term exhaustion, and a possible consolidation before the market renews selling.

The fact price is tagging and expanding the lower bollinger band (here 3 standard deviations from the 200 SMA) is a sign of strength to the downside, but also a sign of oversold conditions.

width=188Australia's April Employment Data: The strength of any bounce to keep the market above parity will have to come from better than expected employment data, which is expected to be -4.8K, after a 44.0K March reading. The forecasts seen on forexfactory, have been above 10 from August 2011 to Feb 2012 and has been scaling back since.

This is the first expected net loss in jobs since the Nov. 11 2009 forecast for -10.1K change (which was beat with 24.5K reading). On that occasion the AUD/USD has already been rallying, and the data helped it push another 200 pips or so in the following days before a major consolidation.

Therefore. Positive data that is more than 10K can help the AUD/USD find some support. However, since one good report does not change the bad trend of data, any bullish outlook from this release should be limited to the 1.0225 pivot, and should also be monitored at the 1.0110 pivot

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Fan Yang CMT is a trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.