The AUDUSD has moved higher ahead of the interest rate decision on Tuesday. The Reserve Bank of Australia will make the decision at 11:30 PM ET with the expectations for no change in policy. The last change was a decline of 0.25% in August 2013 which took the rate from 2.75% to 2.5%

From a technical perspective the price extended to the lowest price going back to July 2010 on Friday after the stronger than expected US Non- Farm Payroll report. The low from 2014 was extended from 0.8659 to 0.8642, but the price closed the week above the old low (at 0.8673 vs 0.8659). This is not the strongest of bearish technical signs.

When the low price today could not take out Friday’s low, and the dollar started to fall against other currencies as well, the AUDUSD rallied and moved back above the 100 and 200 hour MAs (blue and green lines in the chart below). Until last Thursday and Friday the price of the pair had not moved above the 200 hour MA (green line currently at 0.8755) since September 8th. Apart from September 16 and 17, the same could have been said for the 100 hour MA (blue line at 0.87377 currently).

Technical Analysis Preview of the AUDUSD before the RBA Interest Rate Decision.

Technical Analysis Preview of the AUDUSD before the RBA Interest Rate Decision.

The consolidation/correction we have had in the pair over the last 8 trading days (see red box in the chart above), has allowed the two moving averages to catch up with the price, and for the dip buyers to actually push the price above both MAs today. The market is more in balanced going into the decision.

For the decision, traders will likely use the moving averages as the “line in the sand” for bullish or bearish bias. Should the price remain above this area, the bias remains bullish (the 200 hour MA is currently at the 0.8755 while the 100 hour MA is at 0.87377). The next key target becomes the topside of this 8 day boxed range at the 0.8825-30 area (see blue circles 1, 2 and 3). A break above and staying above will have traders looking toward a more meaningful correction toward the 0.89318 level. This is the 38.2% of the move down from the September high to the October 3rd low.

On a move back below the key MA’s, look for sellers to take back control, but I would not be surprised to see dip buyers against the recent lows (see green circles in the chart above)

My gut feeling says that September trended nicely for the entire month to the downside. October might be a corrective/consolidative month – at least at the beginning. I have no position before the decision but should there be a dip below the 100 and 200 hour MA, be on alert for buyers that snap the price back higher – and above the MA levels.

If this happens, I would think it is a clue that buyers are taking more control, and there should be some further short covering and a test of the highs in the red box at some point going forward. Look to buy on the rebound back above the MA levels.

Otherwise, I would look for support against the lows.

Trending turns to non-trending and we have seen 8 days of it now as the low was formed. So be aware for that type of buy the dips mentality. Tonight will be a test for that idea.

A move below the lows and all bets are off.