Forex Technical Update

The Reserve Bank of Australia met during the 10/6 session, and decided to hold the Official Cash Rate (OCR) at 3.25%. With some expecting a rate cut, the hold is slightly hawkish, or relatively less dovish, which is positive for the Australian Dollar. The AUD strengthened after the RBA interest rate decision was released. Let’s take a look at the reactions and technical setups in some AUD-crosses after the risk event.

AUD/USD 4H Chart 11/6/2012 7:55AM EST

AUD/USD 11/6/2012 4H chart

Breakout: The AUD/USD has been coiling between a flat resistance in the 1.0395-1.0410 area and a rising support it bounced off ahead of the RBA decision. After the decision to hold was released in the 11/6 Asian session, the pair surged from below to above the resistance zone. With a hold above the broken resistance area, the AUD/USD has a bullish outlook toward 1.0465 resistance pivot in the near-term, then around 1.0525-1.0530, and then the 1.0623 September high, before exposing the 2012-high of 1.0850.

Failure to hold above 1.04 will make this bullish outlook unclear.

AUD/JPY: Refer to previous update on this pair: http://www.fxtimes.com/technical-updates/audjpy-testing-4-month-range-resistance/

The range resistance at 83.60 is being threatened again after the RBA’s decision to hold the OCR at 3.25%. With a bullish outlook the market targets a  pivot at 84.80 in the very short-term. A range breakout projection (using the width of the range into the direction of the break) targets a slightly more aggressive 87.50-87.80 area, before exposing the 88.61 2012-high.

However, this outlook is still unclear as the breakout is not all there yet. A throwback below 82.90 shelves the bullish outlook for further consolidation. A break below 81.50 would then introduce a bearish outlook in the short-term first with focus on the 79.35-79.55 support area.

AUD/NZD 4H Chart 11/6/2012 8:13AM EST

AUD/NZD 11/6/2012 4H chart

The Australian dollar firmed against the New Zealand dollar. This came after a couple of downswings from 1.2695 down to 1.2520 area. This rally can still be considered a pullback against the bearish swings that broke below a rising trendline as well as establish a top. Also note that the RSI reading in the 4H chart is at 60 after bouncing up from 30. If it holds under 60, the recently established bearish momentum is still maintained.

As we get into the 11/6 US session, the pair is hanging around the 1.26 handle. Let’s see what the US traders will do. An extension to above 1.2650 could be seen as a sign of bullish continuation confirmed by the RSI pushing above 60. Otherwise, the technical signs suggest that the consolidation/correction period is not over.

A hold above 1.2575 still gives a chance for the bullish outlook to develop, while a break back below 1.2570 in the US session is likely a sign that the initial RBA-reaction is unsustainable.

AUD/CAD 4H Chart 11/6/2012 8:20AM EST

AUD/CAD 11/6/2012 4H chart

Finally, the AUD/CAD is also in an interesting setup. The RBA decision turned recent correction action back to bullish continuation, almost. The 4H chart shows a market that topped off, but is in a sharp pullback to the previous high at 1.0388. A break above 1.04 should be a clear sign of bullish continuation. The 4H RSI should also clear above 60. However, we are still at the cusp of this, and a break below 1.0340 could make the case that a double top if forming, making the bullish outlook unclear, and introducing a possible bearish outlook as well.

The topping scenario opens up some retracement targets. In this scenario, I like the 50% retracement at 1.0154 which is near a previous support pivot. To the upside a break above 1.04 targets 1.0435-40 resistance in the near-term, before exposing the August-high at 1.0595.

Let’s see if the 11/6 US session will follow through with the initial RBA-reaction for a stronger AUD. So far in the European session, the strength has stalled, so now we should see how the US traders react to the reaction.

Fan Yang CMT is a forex 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.

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