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

By Stuart McPhee

AUD/USD for Monday, July 7, 2014

The Australian dollar has enjoyed a solid surge higher reaching a new eight month high above 0.95 in the middle of last week, only to return most of its gains in very quick time to finish out the week. Over the last few weeks 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. 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.

The Australian dollar, which appeared to be on course for a return to parity with the U.S. dollar just days ago, is set to end the year below $0.90, say strategists. Reserve Bank of Australia (RBA) governor Glenn Stevens is partially responsible. His comment Thursday that the Aussie is "overvalued, and not just by a few cents," sent the currency as low as $0.9329. It edged up slightly to $0.9353 on Friday. "The RBA is going to continue to jawbone the currency lower. If you've got a central bank talking down the currency, this is likely to discourage foreign investors from investing in Australian assets," David Forrester, currency strategist at Macquarie told CNBC. He sees the currency falling to $0.88 by year-end.

(Daily chart / 4 hourly chart below)

AUD/USD July 7 at 00:05 GMT 0.9358 H: 0.9366 L: 0.9356

AUD/USD Technical

S3S2S1R1R2R3
0.92200.9100-0.9500--

During the early hours of the Asian trading session on Monday, the AUD/USD is just easing back a little towards 0.9350 after falling back from its new eight month high above 0.95 late last week. 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 0.95 again. Current range: trading right above 0.9350.

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 moved back above the 50% level as the Australian dollar has fallen back from the eight month high around 0.95. The trader sentiment changes to in favour of long positions.

Economic Releases

  • 00:30 AU TD-MI Inflation Gauge (Jun)
  • 01:30 AU ANZ Job Ads (Jun)
  • 05:00 JP Leading indicator (Prelim.) (May)
  • 08:30 EU Sentix Indicator (Jul)
  • 12:30 CA Building permits (May)
  • 14:00 CA Ivey PMI (Jun)

*All release times are GMT

Source: AUD/USD - Trying To Recover Lost Ground Around 0.9360