AUD/USD Monthly Technical Analysis for August 2015
The AUD/USD begins August with a strong downside bias. The main trend is down according to the monthly swing chart. The downtrend was reaffirmed when the main bottom at .7532 was taken out. The new main top is .8162. The trend will turn up on a trade through this price.
On Tuesday, August 4, the RBA is expected to leave its benchmark interest rate at 2.00%. However, the statement may contain language which suggests the central bank may implement two additional rate cuts before the end of the year. Even if the central bank refrains from a rate hike, dovish guidance could put pressure on the market.
Your capital is at risk
Low commodity prices and a sluggish Chinese economy are two factors weighing on the Australian Dollar. However, the major reason why this Forex pair is likely to continue to weaken over the long-term is the interest rate differential between Australian and U.S bonds as well as the divergence between Fed and RBA monetary policies.
One can build a bullish scenario during the first week of August if the RBA statement is on the hawkish side. This means that if it eliminates the threat of additional rate cuts. The August 7 U.S. Non-Farm Payrolls report will also influence the price action. Traders are pricing in an increase of 224K new jobs in July. A miss to the downside may take a September rate hike by the Fed off the table. This news will trigger a short-covering rally by the AUD/USD. A bigger-than-expected number will likely trigger the resumption of the down trend.
Technically, the AUD/USD begins the month inside a strong downtrending channel. The upper or resistance angle of the channel is .7424. The lower level and potential downside target drops in at .6236. Based on normal monthly volatility, the market is not likely to reach the support level, but it does give you an idea that the downside is wide open.
The Forex pair may be ripe for reversal bottoms on the daily and weekly charts, but these are likely to create new shorting opportunities according to the monthly chart. You can’t worry about the upside until there is a sustained move over the downtrending angle at .7424.
Because of the RBA meeting on August 4 and the U.S. jobs report on August 7, the first week of August should be extremely volatility with the strong possibility of a two sided trade.