AUD/USD - Desperately Trying To Stay Above Key 0.93 Level

Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Monday, August 18, 2014

The Australian dollar is trading in a very small trading range right on top of the key level at 0.9300 after pushing up well throughout last week. A couple of weeks ago the Australian dollar surged higher to a one week high near 0.9375, before easing back and then falling sharply. It has done well of late to cling onto the 0.93 level after its sharp fall which saw it move from above 0.9400 down to a seven week low below 0.9240. A few weeks ago 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 several 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 at the end of June, 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.

Economists this week found some comfort in consumer and business confidence gauges, but still had doubts about the economy's strength. A rise in the monthly Westpac/Melbourne Institute index of consumer confidence narrowed the gap between it and business confidence indicated in the previous day's survey by NAB, Royal Bank of Canada economist Su-Lin Ong said. But the two may not converge further in a hurry, she said. "We see limited scope for further substantial gains in consumer confidence." With the economy only "muddling along", further convergence might come from falling business confidence rather than rising consumer confidence, Ms Ong said. Commsec's Craig James noted that the weekly ANZ-Roy Morgan consumer confidence measure had fallen back after news of a jump in unemployment, partly reversing a rebound from a post-budget slump. "The good news is that modest wage growth and higher productivity should support the hiring intentions of employers," he said. Ben Jarman, economist at JP Morgan, looked past the immediate concern with consumer confidence. "The bigger issue is that the hard data reveal the economy to be losing momentum, from levels of domestic demand growth that are already sub-par."

(Daily chart / 4 hourly chart below)

AUD/USD August 17 at 23:35 GMT 0.9320 H: 0.9322 L: 0.9313

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9260 0.9220 0.9100 0.9425 0.9500 -

During the early hours of the Asian trading session on Monday, the AUD/USD is trading in a very small trading range right above the key 0.93 level after edging higher to finish out 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 around 0.9320.

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 settled around 55% as the Australian dollar has settled around the 0.93 level. The trader sentiment remains slightly in favour of long positions.

Economic Releases

  • 22:45 (Sun) NZ PPI Inputs & Outputs (Q2)
  • 01:30 AU New motor vehicle sales (Jul)
  • 09:00 EU Trade Balance (Jun)
  • 14:00 US NAHB Builders survey (Aug)

*All release times are GMT