AUD/USD - Consolidates Below 0.9400

Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Wednesday, July 30, 2014

The Australian dollar has spent the last few days easing back below both the 0.9425 and 0.9400 levels with the former providing some resistance, which has now resulted in some consolidation in a small range around 0.9385. The Australian dollar reached a three week high just shy of 0.9480 towards the end of last week after it enjoyed a solid period which saw it surge higher through the resistance level at 0.9425 to the three week around 0.9480, before easing back towards that level. It started last 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.

Consumers have got their groove back, having shaken off their woes about the federal government's planned budget cuts. The latest weekly ANZ-Roy Morgan survey shows consumer confidence levels at a seven-month high, rebounding from a slump in April and May sparked by news of spending cuts. Confidence levels rose 2.4 per cent in the past week, adding to recent gains and giving more weight to the theory that the recent falls were related to temporary shock from the budget. ANZ chief economist Warren Hogan said confidence levels were now back in line with business confidence. "Consumer confidence is now back to pre-budget levels and consistent with moderate growth in consumption and economic activity," he said in a statement on Tuesday. "The good news is that the headline impact of the budget appears to be temporary and the more enduring features of the economy, such as rising share and house prices, job creation and a stable world economy are now driving consumer attitudes to spending and finances." Economists believe that with consumers feeling more confident, retail sales should pick up. Meanwhile, a separate survey found that business confidence also appeared to be improving, with the number of new company startups rising more than a fifth in the June quarter. The Dun and Bradstreet survey also found that nearly two thirds of respondents were more positive about the economy than a year ago.

(Daily chart / 4 hourly chart below)

AUD/USD July 30 at 01:50 GMT 0.9380 H: 0.9387 L: 0.9374

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9220 0.9100 - 0.9425 0.9500 -

During the early hours of the Asian trading session on Wednesday, the AUD/USD is continuing to ease a little lower under the 0.9400 level after meeting resistance at the 0.9425 level over the last few days. 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 0.9400 around 0.9380.

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 up a little from its lowest level in over one year as the Australian dollar has eased back below the key 0.9425 level. The trader sentiment remains in favour of short positions.

Economic Releases

  • 23:30 (Tue) JP Unemployment (Jun)
  • 23:50 (Tue) JP Industrial Production (Prelim.) (Jun)
  • 09:00 EU Business & Consumer Survey (Jul)
  • 12:15 US ADP Employment Survey (Jul)
  • 12:30 CA Industrial product price index (Jun)
  • 12:30 CA Raw Materials Price Index (Jun)
  • 12:30 US Core PCE Price Index (1st Est.) (Q2)
  • 12:30 US GDP Annualised (1st Est.) (Q2)
  • 12:30 US GDP Price Index (1st Est.) (Q2)
  • 18:00 US FOMC - Fed Funds Rate (Jul)

*All release times are GMT