AUD/USD - Receives Solid Support From 0.9300

Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Thursday, August 7, 2014

In the last half day the Australian dollar has surged higher to a one week high near 0.9375, before easing back slightly in recent hours. It has done well of late to cling onto the 0.93 level after its sharp fall last week which saw it move from above 0.9400 down to a seven week low just below 0.9300, and in more recent days receive solid support there too. Earlier last week it was easing back below both the 0.9425 and 0.9400 levels with the former providing some resistance. The Australian dollar reached a three week high just shy of 0.9480 a couple of weeks ago 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. The Australian dollar enjoyed a solid surge higher reaching a new eight month high above 0.95 several 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 Reserve Bank of Australia has now kept the official cash rate at a record low 2.5 per cent for an entire year, after holding the rate steady at its August board meeting. The central bank reaffirmed its view that the most prudent course was likely a period of stability in rates as it waits for the effects of easing to flow through the economy. The RBA said monetary policy was appropriately configured and that a continued accommodative stance should support demand and help growth strengthen over time. House prices continue to rise but the pace of growth has been slower this year than last year, the RBA noted. The central bank again warned that the Australian dollar remains high by historical standards, particularly given a fall in key commodity prices, and was offering less assistance that it might in rebalancing the economy. Unemployment was unlikely to decline consistently for "some time yet", the RBA said. Despite a recent increase in inflation, wage growth is set to stay modest, which should keep inflation consistent with the target of 2 per cent to 3 per cent, the central bank said.

(Daily chart / 4 hourly chart below)

AUD/USD August 7 at 00:20 GMT 0.9350 H: 0.9356 L: 0.9347

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9300 0.9220 0.9100 0.9425 0.9500 -

During the early hours of the Asian trading session on Thursday, the AUD/USD is easing back a little after surging higher in recent hours to a one week high near 0.9375. 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 around 0.9350.

Further levels in both directions:

• Below: 0.9300, 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 strongly from its lowest level in over one year as the Australian dollar has eased right back towards 0.93. The trader sentiment has changed to being in favour of long positions.

Economic Releases

  • 23:50 (Wed) JP Bank Lending Data (Jul)
  • 23:50 (Wed) JP Current Account (Jun)
  • 01:30 AU Unemployment (Jul)
  • 11:00 UK BoE MPC - APF Total (Aug)
  • 11:00 UK BoE MPC - Base Rate (Aug)
  • 11:00 UK BoE Monetary Policy Committee meeting and rate decision
  • 11:45 EU ECB - Rate Announcement (Aug)
  • 12:30 CA Building permits (Jun)
  • 12:30 EU ECB's Draghi gives press conference on rate announcement
  • 12:30 US Initial Claims
  • 14:00 CA Ivey PMI (Jul)
  • 19:00 US Consumer Credit (Jun)
  • JP BoJ Monetary Policy meeting (to 8th)

*All release times are GMT