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The AUD/USD starts out 2015 in a position to decline further after a weak close in December. Last month, the Forex pair reaffirmed its downtrend on the monthly chart with its sustained move under the previous main bottom at .8659 and the major 50% level at .8545. Both of these prices are resistance in January. Additional resistance angles come in at .8544 and .8556. The best area to sell on a retracement is the resistance cluster at .8544 and .8545.



The main range was formed by the July 2008 bottom at .6008 and the July 2011 top at 1.1080. Its retracement zone at .8545 to .7945 is currently being tested. Last month’s sharp decline through the upper or 50% level at .8545 means the selling pressure is real which makes the Fibonacci level at .7945 the primary downside target in January. Trader reaction to this price will set the tone for the month.

If the selling pressure is strong enough to take out .7945 with conviction then look for the break to extend into the next uptrending Gann angle at .7508.

Oversold conditions could produce periodic short-covering rallies, but these rallies are likely to set up fresh shorting opportunities. Bearish traders should continue to press the market unless .8544 is taken out and this seems pretty remote given the fundamentals.

Fundamentally, the combination of a weak Australian economy and the impending Fed interest rate hike sometime between April and June should be the forces driving the AUD/USD lower in 2015. Low iron ore prices and a weakening economy in China are two forces weighing on the Australian economy. The interest rate differential is favoring the U.S. at this time. This should be the key fundamental factor to focus on this year.

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