AUD/USD - Drops To Two Month Low Near 0.9250

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

By Stuart McPhee

AUD/USD for Friday, August 8, 2014

In recent hours the AUD/USD is easing back a little after dropping so sharply in the last 24 hours from above 0.9350 down to a two week low at 0.9260. In the last 48 hours the Australian dollar had surged higher to a one week high near 0.9375, before easing back and then falling sharply. It had 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.

A surprising jump in Australia’s unemployment rate has poured cold water on any expectations of a rate hike in the foreseeable future. Australia’s jobless rate jumped to 6.4 per cent in July, from 6.0 per cent in June, official figures on Thursday showed. Economists had expected unemployment to remain unchanged. The total number of people with jobs also disappointed, falling by 300 against expectations that 12,000 jobs would be added to the economy. The Australian Bureau of Statistics figures were significantly weaker than the market was looking for, JP Morgan economist Tom Kennedy said. “Unemployment has got to 6.4 per cent a lot quicker than we had expected and a lot faster than the Reserve Bank had expected as well,” Mr Kennedy said. “The figures were very soft all around — there was virtually no employment growth, we’ve had hours fall, part-time employment fall and only very tepid full-time employment growth so all in all, a very, very soft report. “This pours a little bit of cold water over those expecting an earlier rate hike. “When you put this together with the expectation that tomorrow you are going to see the RBA downgrade their inflation forecast in the Statement on Monetary Policy, it really adds to the current guidance of the RBA that rates are going to remain on hold for a while yet.”

(Daily chart / 4 hourly chart below)

AUD/USD August 8 at 00:05 GMT 0.9269 H: 0.9273 L: 0.9266

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9260 0.9220 0.9100 0.9425 0.9500
Click to enlarge

During the early hours of the Asian trading session on Friday, the AUD/USD is easing back a little after dropping so sharply in the last 24 hours from above 0.9350 down to a two week low at 0.9260. 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: 0.9260, 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 below 0.93. The trader sentiment has changed to being in favour of long positions.

Economic Releases

  • 01:30 AU RBA Statement on Monetary Policy
  • 01:30 AU Housing & Lending Finance (Jun)
  • 08:30 UK Trade Balance (Jun)
  • 12:30 CA Unemployment (Jul)
  • 12:30 US Non Farm Productivity (Prelim.) (Q2)
  • 12:30 US Unit Labour Costs (Prelim.) (Q2)
  • 14:00 US Wholesale Inventories (Jun)
  • JP BoJ MPC – Overnight Rate (Aug)
  • JP Economy Watchers Survey (Jul)
  • JP BoJ Monetary Policy Statement

*All release times are GMT