AUD/USD - Eases Away From Resistance At 0.9425

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Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Tuesday, July 22, 2014

The Australian dollar has started this week by slowly easing away from the resistance level around 0.9425 which continues to stand tall and play havoc with buyers. The Australian dollar enjoyed a solid surge higher reaching a new eight month high above 0.95 a few weeks ago, only to return most of its gains in very quick time to finish out that week. Since the middle of June 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, even though it has allowed the small excursion to above 0.95. 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. 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.

The national housing market continued to post double-digit annual price rises last week as the winter rebound entered its sixth week. After falling for a total of 2.4 per cent through most of May and early June, RP Data's gauge of auction prices in the mainland state capitals has now bounced back by 3.4 per cent, with annual growth at 11.0 per cent. That rebound included the 0.2 per cent gain racked up in the week to Sunday, figures from RP data on Monday showed. So far this year, prices are up by 5.2 per cent. In comparison, the year-to-date gain this time last year was 4.1 per cent, a gain that was translated by a strong second half into an annual rise of just under 10 per cent. The latest weekly rise was the smallest since the first of the current run that began in the second week of June, but that does not the market is topping out. There was a similar slowdown in price rises in early July 2013, but the market kept on rising, with a couple of flat spots but no significant pullback, until early this winter. This pattern is apparently being repeated this year. Melbourne appears to have stolen the crown of star performer from Sydney, with a surge of 7.6 per cent per cent from the recent low in mid-June, versus Sydney's 3.1 per cent bounce.

(Daily chart / 4 hourly chart below)

AUD/USD July 22 at 00:15 GMT 0.9366 H: 0.9377 L: 0.9365

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9220 0.9100 - 0.9425 0.9500 -
Click to enlarge

During the early hours of the Asian trading session on Tuesday, the AUD/USD is easing back a little from the key resistance level at 0.9425 having recently surged higher and run into it. 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 below 0.9425 around 0.9365.

Further levels in both directions:

• Below: 0.9220 and 0.9100.

• Above: 0.9425 and 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 below the 50% level as the Australian dollar has crept back up towards the resistance level at 0.9425. The trader sentiment shifts to be in favour of short positions, but only just.

Economic Releases

  • 04:30 JP All Industry activity index (May)
  • 05:00 JP Leading indicator (Final) (May)
  • 08:30 UK Public Borrowing (PSNB ex interventions) (Jun)
  • 10:00 UK CBI Industrial Trends (Jul)
  • 12:30 US CPI (Jun)
  • 13:00 US FHFA House Price Index (May)
  • 14:00 US Existing home sales (Jun)

*All release times are GMT