Seeking Alpha
Currencies, macro, fixed income
Profile| Send Message|
( followers)  

By Stuart McPhee

AUD/USD for Tuesday, July 1, 2014

In the last 12 hours or so the Australian dollar has surged higher and returned to the key 0.9425 level or thereabouts. 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.

Australian inflation has remained benign giving the RBA room to leave rates on hold. The TD Securities/Melbourne Institute monthly inflation gauge remained flat in June following a rise of 0.3 per cent in May and 0.4 per cent in April. Price rises for rent, petrol and tobacco in June were offset by falls in fruit and vegetables, health and recreation and culture. In the year to June, the gauge rose 3.0 per cent. The RBA's target range for inflation is between two and three per cent. But even if inflation pushes beyond three per cent in the June quarter, that won't force a rate hike, TD Securities head of Asia Pacific research Annette Beacher said. "It appears that the RBA, like the US Federal Reserve, is willing to run the risk of higher inflation before it acts, hence why we pushed our call for the first RBA hike to March quarter 2015," Ms Beacher said. "We expect underlying inflation to remain in the top half of the RBA's two-to-three per cent target band and could remain elevated closer to three per cent given the clear signal from our gauge that inflation remains sticky."

(Daily chart / 4 hourly chart below)

AUD/USD July 1 at 00:05 GMT 0.9432 H: 0.9433 L: 0.9428

AUD/USD Technical

S3S2S1R1R2R3
0.92200.9100-0.9425--

During the early hours of the Asian trading session on Tuesday, the AUD/USD is trading within a narrow range just above the key level of 0.9425 after recently surging higher from below 0.94. 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 0.9430.

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

  • 04:30 AU RBA - Overnight Rate (Jul)
  • 05:00 JP Vehicle Sales (Jun)
  • 07:00 UK Halifax House Price Index (1st-8th) (Jun)
  • 08:00 EU Manufacturing PMI (Jun)
  • 08:30 UK CIPS/Markit Manufacturing PMI (Jun)
  • 09:00 EU Unemployment (May)
  • 13:45 US Manufacturing PMI (Jun)
  • 14:00 US Construction Spending (May)
  • 14:00 US IBD Consumer Optimism (Jul)
  • 14:00 US ISM Manufacturing (Jun)
  • US Vehicle Sales (Jun)

*All release times are GMT

Source: AUD/USD - Attraction To Around 0.9425 Becoming Obsessive