AUD/USD Monthly Technical Analysis for September 2016

The AUD/USD closed lower in August, finishing the month at .7516, down 0.0083 or -1.09%. The catalyst behind the selling pressure was the possibility of a Fed rate hike as early as September.

August started with the Reserve Bank of Australia cutting its benchmark interest rate from 1.75% to 1.50%. The move was in reaction to stubbornly low inflation that was reported in late July. Traders initially drove the Aussie higher on the news because of increased demand for the higher yield in Australia.

The Forex pair topped on August 10, a day after RBA Governor Glenn Stevens gave his farewell speech. It also corresponded with growing support for a U.S. Federal Reserve rate hike. Other keep reports in August included Employment Change which showed a 26.2K gain versus a 10.2K estimate and a drop in the Unemployment Rate from 5.8% to 5.7%.

Near the end of the month, the AUD/USD began to weaken because of hawkish comments regarding the timing of the next Fed rate hike by several high ranking Fed officials. On Friday, August 26, Fed Chair Janet Yellen said the economy was strengthening, but she did not offer any hints that rates may rise in September. Fed Vice Chair Stanley Fischer said that two rate hikes in 2016 were “possible”.

September will begin with investors focused on the U.S. Non-Farm Payrolls report. A stronger than expected report may give the Fed a greenlight to raise rates. A weaker than expected report may take a September rate hike off the table.

On September 6, the RBA is expected to leave interest rates unchanged at 1.50%. Quarterly GDP is expected to come in lower than last quarter at 0.4%.

TECHNICAL ANALYSIS

Technically, the main trend is up according to the monthly swing chart. A trade through .7834 will signal a resumption of the uptrend.

The main range is .9504 to .6826. Its retracement zone at .8165 to .8481 is the primary upside target.

The intermediate range is .8162 to .6826. Its retracement zone at .7494 to .7652 has provided resistance the last four months.

The short-term range is .6826 to .7834. Its retracement zone at .7330 to .7211 is the primary downside target.

Based on August’s close at .7516, the direction of the AUD/USD in September is likely to be determined by trader reaction to the 50% level at .7494.

A sustained move over .7494 will indicate the presence of buyers. This could drive the market into the Fib level at .7652. This is a possible trigger point for an acceleration into the next upside target angle at .8106 over the next few months

A sustained move under .7494 will signal the presence of sellers. This could produce a labored break with potential targets coming in at .7466, .7424 and .7330.

The daily chart starts to open up under .7330 with the next target .7211, followed closely by the uptrending angle at .7146.

Watch the price action and read the order flow at .7494 in September. Trader reaction to this level will determine the direction of the market in September.