AUD/USD Resistance At 0.9425 Stands Tall

 |  Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Friday, June 20, 2014

The Australian dollar has recently run into a wall of resistance again at the 0.9425 level after surging higher in the last day or so. After the Australian dollar had enjoyed a solid surge over the last couple of weeks which has returned it to a previous resistance level around 0.9425, it has then fell sharply away from this level back to a one-week low around 0.9330 a few days ago. Its recent surge higher to the resistance level around 0.9425 was after spending a couple of weeks at the end of May trading near and finding support at 0.9220. In moving up to the resistance level around 0.9425, it achieved a two-month high. The 0.9220 level has repeatedly reinforced its significance as it is again likely to support price should the Australia dollar retreat further. Only a month ago the Australian dollar was placing pressure on the resistance level at 0.94 when it was able to poke through for a short period and reach a four-week high in the process, however in the last 24 hours it has surpassed those levels and achieved the two-week high.

Throughout April and into May the Australian dollar drifted 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.

Record-low interest rates in Australia should be helping Reserve Bank governor Glenn Stevens guide the stubbornly high Australian dollar lower to help the local economy. However his aim is being frustrated by interest rates in the US that are even lower, with Federal Reserve boss Janet Yellen signalling they will remain low for a “considerable time”. The Aussie fell to a two-week low of 93.22 US cents on Tuesday after minutes of the RBA’s June board meeting showed it wants to keep the cash rate at a record low of 2.5 per cent “for some time yet”, and included a downbeat assessment on Australia’s economic growth prospects. But the dollar bounced back up through 94 US cents early Thursday morning after Dr Yellen wound up the Fed’s two-day policy meeting saying she would keep the federal funds rate steady despite a recent spike in inflation.

(Daily chart / 4 hourly chart below)

AUD/USD June 19 at 23:45 GMT 0.9398 H: 0.9403 L: 0.9394

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 remaining steady right around 0.9400 after surging higher from down around 0.9330. 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 right around 0.9400.

Further levels in both directions:

• Below: 0.9220 and 0.9100.

• Above: 0.9425.

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 fallen sharply of late as the Australian dollar has rallied back to two-month highs near 0.9425. The trader sentiment remains in favour of short positions.

Economic Releases

  • 08:00 EU Current Account (Apr)
  • 08:30 UK Public Borrowing (PSNB ex interventions) (May)
  • 12:30 CA CPI (May)
  • 12:30 CA Retail Sales (Apr)
  • 14:00 EU Flash Consumer Sentiment (Jun)

*All release times are GMT