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AUD/USD Monthly Technical Analysis for August 2014

Higher inflation data and the belief the Reserve Bank of Australia’s next move will be an interest rate hike, helped drive the AUD/USD into a new high for the year at .9504 last month. An improving economy in China also helped underpin the Forex pair at times during July. However, the stronger U.S. Dollar and the dumping of higher-risk assets helped drive the Aussie down during the last week of the July, leading to a lower close for the month.



Technically, the AUD/USD posted a potentially bearish closing price reversal top. This chart pattern will be confirmed by a break through .9278. Typically, a closing price reversal top signals the start of a 2 to 3 month correction of the last rally. The last rally was .8659 to .9504, making .9081 to .8982 the next likely downside target.

Last month, selling pressure came in as the market approached a downtrending angle and a major 50% level at .9573. The angle drops in at .9556 this month. The selling pressure late in the month also put the market on the weakside of another downtrending angle at .9356. This angle is resistance this month.



The first downside target in August is the uptrending angle at .9219. This is followed by the Fibonacci level at .9218. These two levels combine to form a solid support cluster. Watch for a technical bounce on the first test. Once this area is cleared, look for a drive into the retracement zone at .9081 to .8982.

The closing price reversal top gives the market a downside bias this month. Furthermore, the high at .9504 has the potential to become a bearish secondary lower top. Fundamentally, the strengthening U.S. economy along with concerns about Ukraine, Gaza and general weakness in the global economy may lead to more risky asset liquidation that should keep the pressure on the Aussie throughout the month.