AUD/USD - Settles On Support Level Around 0.88

Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

For the best part of the last month the Australian dollar has established and traded within a narrow range roughly between 0.88 and the recent resistance level at 0.90. A week ago the Australian dollar was able to rally higher pushing through the resistance at 0.90 to a one month high near 0.91, however it has since returned to more familiar territory below the resistance level at 0.90, collapsing down to near a four year low below 0.88.

After showing some resilience in early December moving to a one week high above 0.9150, the AUD/USD spent the next two weeks turning around sharply and falling heavily down to a then three month low close to 0.88. After all of its steady good work 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 then some more.

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. It has been all down hill since then. 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 down trend 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.

The Australian dollar fell to its lowest point for almost four years on Thursday after figures showed that unemployment remained unchanged in December. The currency fell from 88.94 US cents to 88.27 US cents within 10 minutes of the labour force data at 11.30am - its lowest level since July 2010 - and reached as low as 88.01 US cents at lunchtime. Unemployment in December was unchanged at 5.8%, the Australian Bureau of Statistics' seasonally adjusted figures showed on Thursday, with the total number of people in work falling 22,600 to 11.630 million in the month. But full-time employment fell 31,600 to 8.068 million in December and part-time employment was up 9,000 to 3.562 million. Despite the soft labour force market, economists do not expect further interest rate cuts.

(Daily chart / 4 hourly chart below)

AUD/USD January 16 at 22:55 GMT 0.8816 H: 0.8828 L: 0.8776

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8900 0.8830 - 0.9080 0.9180 0.9500

During the early hours of the Asian trading session on Friday, the AUD/USD is rallying a bit back above 0.88 after trading at a near four year low in the last 24 hours. The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents. Current range: trading just above 0.8800.

Further levels in both directions:

• Below: 0.8900 and 0.8830.

• Above: 0.9080, 0.9180 and 0.9500.

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 has moved back above 70% as the Australian dollar has dropped back below 0.90 after recently reaching a one month high. The trader sentiment remains in favour of long positions.

Economic Releases

  • 05:00 JP Consumer Confidence (Dec)
  • 09:30 UK Retail Sales (Dec)
  • 13:30 US Building Permits (Dec)
  • 13:30 US Housing Starts (Dec)
  • 14:15 US Capacity utilisation (Dec)
  • 14:15 US Industrial production (Dec)
  • 14:55 US Univ of Mich Sent. (Prelim.) (Jan)

*All release times are GMT