AUD/USD - Desperate To Hold Onto Key Level At 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. However, for the last couple of weeks, the Australian dollar has fallen sharply back down to the support level at 0.88 and pushed through moving to a multi-year low at 0.8660 several days ago. Over the last week, it has rallied back above 0.88 again only to be rejected and sold off again moving back down below 0.8750 again before making another run over the last 12 hours or so. The Australian dollar seems determined to cling on to the 0.88 level. About a week ago, it surged higher to a one week high near 0.8890 before returning back again to the key 0.88 level and below. A couple of weeks 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. 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 downhill 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.

There was some good news out of Australia for a change, as NAB Business Confidence, a key event, improved to 6 points in December, up from 5 points a month earlier. However, CB Leading Indicators failed to keep pace, dropping to just 0.2%, down from a 0.5% gain in November. The strong Business Confidence release gave the wobbly Aussie a brief boost. On Thursday, HIA New Home Sales posted a decline of -0.4% in December, compared to a sharp gain of 7.5% a month earlier.

(Daily chart / 4 hourly chart below)

AUD/USD January 30 at 22:25 GMT 0.8792 H: 0.8800 L: 0.8718

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8650 - - 0.8800 0.9080 0.9180

During the early hours of the Asian trading session on Thursday, the AUD/USD is still trying to creep up towards the resistance level at 0.88 after earlier falling away from it again. The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents. Current range: trading just below 0.8800 around 0.8795.

Further levels in both directions:

• Below: 0.8650.

• Above: 0.8800, 0.9080 and 0.9180.

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 towards 60% as the Australian dollar has rallied back to the resistance level at 0.8800 again. The trader sentiment remains in favour of long positions.

Economic Releases

  • 21:45 (Thu) NZ Trade Balance (Dec)
  • 23:30 (Thu) JP CPI Core (Nation) (Dec)
  • 23:30 (Thu) JP Unemployment (Dec)
  • 23:50 (Thu) JP Industrial Production (Prelim.) (Dec)
  • 00:05 UK GfK Consumer Confidence (Jan)
  • 00:30 AU Private Sector Credit (Dec)
  • 05:00 JP Construction orders (Dec)
  • 05:00 JP Housing starts (Dec)
  • 10:00 EU HICP (Flash) (Jan)
  • 10:00 EU Unemployment (Dec)
  • 13:30 CA GDP (Nov)
  • 13:30 US Core PCE Price Index (Dec)
  • 13:30 US Employment cost index (Q4)
  • 13:30 US Personal income (Dec)
  • 13:30 US Personal spending (Dec)
  • 14:45 US Chicago PMI (Jan)
  • 14:55 US Univ of Mich Sent. (Final) (Jan)

*All release times are GMT