AUD/USD - Runs Into Wall Of Resistance At 0.9425 Again

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

By Stuart McPhee

AUD/USD for Monday, June 30, 2014

Over the last few weeks the Australian dollar has made a significant push towards the key resistance level at 0.9425 and tried to get through. However, despite its best efforts it has been rejected every time as this key level continues to stand tall. At the start of last week the Australian dollar surged higher and reached a two month high at 0.9445 before succumbing to the resistance at 0.9425 and easing lower. After the Australian dollar had enjoyed a solid surge in the first couple of weeks of June which returned it to the resistance level around 0.9425, it then fell sharply away from this level back to a one week low around 0.9330 before rallying higher yet again. 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. The 0.9220 level has repeatedly reinforced its significance as it is again likely to support price should the Australia dollar retreat further.

It was only a month or so 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 recent times it has surpassed those levels and achieved new levels around 0.9425. 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.

Borrowers can rest easy as it looks like the Reserve Bank's cash rate will not go up for the remainder of the year. All 16 market economists surveyed by AAP say the RBA won't move the cash rate at its board meeting on Tuesday, and only two say there will be a rate rise before Christmas. Seven are predicting a hike in the first half of 2015, which would be the first interest rate rise in over four years. St George chief economist Besa Deda recently moved her forecast for the next rate hike from end of 2014 to the first quarter of 2015. "Inflation has moved in the upper part of the Reserve Bank's target band and economic growth has improved since turning a corner around September of last year," she said. "However, the concerns about the outlook suggest the start of the rate-hike cycle is still some time away." Central banks raise their interest rates to keep inflation from getting too high, and cut the rate to help stimulate economic growth. The Australian economy is still in recovery mode and will need more time to adjust to the decline in mining investment that has been at all time highs in recent years, Ms. Deda said.

(Daily chart / 4 hourly chart below)

AUD/USD June 29 at 23:50 GMT 0.9419 H: 0.9433 L: 0.9417

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 Monday, the AUD/USD is just easing away again under the resistance level at 0.9425. 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 0.9420.

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 back below the 50% level as the Australian dollar has pushed back up towards the resistance at 0.9425 again. The trader sentiment changes to in favour of long positions.

Economic Releases

  • 01:30 AU Private Sector Credit (May)
  • 05:00 JP Housing starts (May)
  • 06:00 JP Construction orders (May)
  • 08:00 EU M3 Money Supply (May)
  • 08:30 UK BoE - Mortgage Approvals (May)
  • 08:30 UK BoE - Net Consumer Credit (May)
  • 08:30 UK BoE - Secured Lending (May)
  • 08:30 UK M4 Money Supply (May)
  • 09:00 EU Flash HICP (Jun)
  • 12:30 CA GDP (Apr)
  • 13:45 US Chicago PMI (Jun)
  • 14:00 US Pending Home Sales (May)

*All release times are GMT