AUD/USD - Eases Away From 8-Month High To 0.9440

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

By Stuart McPhee

AUD/USD for Thursday, July 3, 2014

The Australian dollar has enjoyed a solid surge higher reaching a new eight-month high above 0.95 in the last couple of days, before falling back towards the previous key level around 0.9425 and settling around 0.9440. Over recent time, the Australian dollar has made repeated attempts to break through the resistance level around 0.9425, however despite its best efforts it was rejected every time as the key level continued 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 Australian 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.

Falling iron ore prices have caused the biggest blowout in Australia's trade deficit in 16 months. Australia's trade balance was $1.9 billion in the red in May, nearly triple April's $780 million deficit and much larger than economists had expected. It was the second monthly trade deficit in a row and the largest since January 2013. Exports fell five percent in May, while imports were down one percent, the Australian Bureau of Statistics figures showed. NAB senior economist David de Garis said rising volumes in mining exports were not enough to offset a severe drop in iron ore prices. "Apart from the cyclone season at the turn of the year iron ore shipments just kept carrying on rising," he said. "We know that the fall in prices have been unwinding a lot of the rise in volumes." The iron ore price plunged 12.8 percent in May, starting the month at $US109 a tonne and dropping to $US95.

(Daily chart / 4 hourly chart below)

AUD/USD July 2 at 23:55 GMT 0.9439 H: 0.9443 L: 0.9436

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9220 0.9100 - 0.9500 - -
Click to enlarge

During the early hours of the Asian trading session on Thursday, the AUD/USD is just easing back a little after falling back from its new eight-month high above 0.95. 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 0.9490.

Further levels in both directions:

• Below: 0.9220 and 0.9100.

• Above: 0.9500.

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 towards the 50% level as the Australian dollar has pushed back up and reached a new eight-month high around 0.95. The trader sentiment changes to in favour of long positions.

Economic Releases

  • 01:30 AU Building approvals (May)
  • 01:30 AU Retail trade (May)
  • 08:00 EU Composite PMI (Jun)
  • 08:00 EU Services PMI (Jun)
  • 08:30 UK CIPS/Markit Services PMI (Jun)
  • 09:00 EU Retail Trade (May)
  • 11:45 EU ECB Rate Announcement (Jul)
  • 12:30 CA Merchandise Trade (May)
  • 12:30 EU ECB President Draghi gives press conference following interest rate announcement
  • 12:30 US Initial Claims (28/06/2014)
  • 12:30 US Non-farm & Private Payrolls (Jun)
  • 12:30 US Trade Balance (May)
  • 12:30 US Unemployment (Jun)
  • 14:00 US ISM Non-Manufacturing (Jun)

*All release times are GMT