AUD/USD Rests On Support Around 0.9220

Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Friday, May 23, 2014

Last week the Australian dollar was placing pressure on the resistance level at 0.94 and it was able to poke through for a short period and reach a four week high in the process last week. However throughout this week it has slowly drifted lower and found support again around 0.9220. This level is being revisited after previously providing some support a few weeks ago. The Australian dollar did well to finish out a couple of weeks ago in moving through the resistance level at 0.93 and maintaining the break. A few weeks ago prior to the break through, the Australian dollar had fallen back down below the 0.93 level and settled within a very narrow range just below the level before surging back up. This break higher has provided some hope that it may resume its up trend that it has experienced over the last few months.

The last month or so has seen the Australian dollar drift lower from resistance just below 0.95 after reaching a six month high in that area and down to the recent key level at 0.93 before falling lower. During this similar period the 0.93 level has become very significant as it has provided stiff resistance for some time. The Australian dollar appeared to be well settled around 0.93 which has illustrated the strong resurgence it has experienced throughout this year. For the best part of February and March the Australian dollar did very little other than continue to trade around the 0.90 level, although at the beginning of March it crept a little lower down to a three week low below 0.89. Towards the end of March however, the Australian dollar surged higher strongly moving to the resistance level at 0.93 before consolidating for a week or so.

For several months either side of the New Year the Australian dollar established and traded within a narrow range roughly between 0.88 and the previous resistance level at 0.90. Back in January 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 quickly returned to more familiar territory below the resistance levels at 0.90 and 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.

Consumer confidence has tumbled to its lowest level in nearly three years after the Federal Government's budget. Westpac and the Melbourne Institute's long-running and widely watched survey of consumer sentiment dropped 6.8 per cent between April and May to a reading of 92.9, solidly below the 100-point level where optimists equal pessimists. However, the national gloom over the nation's key financial document is far from unprecedented, with last year's budget eliciting a virtually identical 7 per cent fall in confidence, albeit from a slightly higher starting point. Unlike last year's budget though, where almost half the respondents expected no effect on their family finances over the next year, almost 60 per cent expect the first budget from the Coalition to make them worse off, with only 3.1 per cent expecting to be better off. Westpac's chief economist Bill Evans says it will take another month or two to ascertain whether the budget has a lasting impact on confidence.

(Daily chart / 4 hourly chart below)

AUD/USD May 22 at 23:40 GMT 0.9226 H: 0.9229 L: 0.9223

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9220 0.9100 - 0.9380 0.9400 -
Click to enlarge

During the early hours of the Asian trading session on Friday, the AUD/USD is finding support at 0.9220 after recently falling down to that level again. The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents and it has done very well to recover slightly to well above 0.90 again. Current range: trading around 0.9225.

Further levels in both directions:

• Below: 0.9220 and 0.9100.

• Above: 0.9380 and 0.9400.

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 strongly above 60% as the Australian dollar has fallen back towards 0.92. The trader sentiment remains in favour of long positions.

Economic Releases

  • 12:30 CA CPI (Apr)
  • 14:00 US New Home Sales (Apr)

*All release times are GMT