AUD/USD - Continues Drive Towards 0.90 With Three-Month Low

Includes: AUD
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Wednesday, December 4, 2013

The AUD/USD has resumed its downward decline after rallying back up towards 0.9160 over the last few days as it traded to a three month low below 0.9050. Last week wasn't so good as it continued its demise moving to another new low, this time almost reaching 0.9050 before rallying higher to finish out the week. After all of its steady good work a few weeks ago in the middle of November, which saw the AUD/USD steadily move higher from support at 0.93 back up to a one week high near 0.9450, the AUD/USD has since returned all of those gains and some moving down to the three month low. After settling around the 0.95 level for over a week earlier last month, the AUD/USD started to drift lower back towards the support at 0.93.

Throughout most of October, the AUD/USD enjoyed a solid and steady move higher from the support level at 0.93 up to the resistance level at 0.95 and beyond to a high around 0.9760. Throughout the first half of September, the AUD/USD enjoyed a solid run, which was punctuated by a strong surge higher sending it to a then three month high just above 0.95. A couple of months ago, the AUD/USD had been trying valiantly to stay above the support level at 0.89 as all week it placed downward pressure but was unable to sustain any break lower. At the beginning of August, it moved very well from three year lows to move back above the key level of 90 cents and beyond to a two week high just above 0.92 to finish out that week. At the end of July, the AUD/USD fell very strongly and appeared to resume the medium-term downtrend as it moved to a new three year low near 0.8850 but it reversed very well and looked poised to continue back towards the longer-term resistance level at 0.93. For the most part of the last week, it moved very little and was quite subdued staying above the support level at 0.94.

Throughout July, the AUD/USD placed constant pressure on the 0.93 level again as it continued to place buying pressure on that level; however, the resistance there was able to stand firm. It was during this time it did very well to maintain its price level well above 0.92 and place upward buying pressure on the resistance level at 0.93. Throughout July, the AUD/USD spent most of its time trading between 0.90 and 0.93 threatening to break through either level at multiple stages. The 0.9150 level also became a key level during that time providing both some resistance and more recently support, and this was called upon again a few weeks ago providing some much needed support however it was completely ignored a couple of weeks ago as the AUD/USD fell heavily through it. It was only a few months ago that many were waiting for the AUD/USD to break below the 90 cents level and then it would have been a matter of how far can it drop. It had continued to drift lower and move towards the 90 cents level, a level not seen for three years. Considering the speed of its decline throughout several months this year, the last couple of months has seen a significant slowing down and almost some consolidation as it has rested well on the support at 0.90 and now made its way back to 0.95. Throughout April to August, the AUD/USD established a strong medium term down trend with lower peaks and lower troughs, as it has moved from near 1.06 down to near 0.90 in that time.

As expected, the RBA did not reduce interest rates on Tuesday. The benchmark rate has remained pegged at 2.50% since August. Although the Bank has not shied away from saying that the Aussie is overvalued and is impeding economic growth, it has been hesitant to reduce rates, and this was apparent once again on Tuesday. In other news, Retail Sales dropped to 0.5% in October, down from 0.8% the month before, but edged above the estimate of 0.4%. The current account deficit widened to -12.7 billion dollars, well above the estimate of -11.1 billion.

(Daily chart / 4 hourly chart below)

Click to enlarge Click to enlarge

AUD/USD December 4 at 01:50 GMT 0.9051 H: 0.9146 L: 0.9045

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9000 --- --- 0.9500 0.9550 0.9700
Click to enlarge

During the early hours of the Asian trading session on Wednesday, the AUD/USD is trying to falling down further as it heads towards 0.90. Despite its strong recovery in September, the Australian dollar has been in a free-fall for a lot of this year. Current range: trading below 0.91 down around 0.9050.

Further levels in both directions:

• Below: 0.9000.

• Above: 0.9500, 0.9550 and 0.9700.

OANDA's Open Position Ratios

(Shows the ratio of long vs. short positions held for the AUD/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for the AUD/USD closes in on 70% as the Australian dollar continues to fall below the 0.92 level. The trader sentiment remains in favour of long positions.