AUD/USD - Looking For Support At 0.93

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Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Wednesday, August 20, 2014

The Australian dollar is threatening to break through the support level at 0.93, after recently falling sharply from above 0.9340 in recent hours. Over the last month or so, it has generally been sliding lower from close to 0.95 down to its present trading levels around 0.93. 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.

The Reserve Bank of Australia has warned of a "significant degree" of uncertainty about the economic outlook, but reaffirmed its view that a period of stability in interest rates is likely prudent. Minutes from the central bank's August meeting show the board expects inflation to remain consistent with its target of 2 per cent to 3 per cent over the next two years, despite a recent rise. The bank again commented that the exchange rate remained high and was offering less assistance than it could in achieving balanced economic growth. "Members noted that there was inevitably a significant degree of uncertainty about the outlook, given the number of forces working in different directions," the RBA said. The central bank is waiting to see how the economy shifts away from its dependence on mining investment, which is declining after being a key driver for around a decade. At its August meeting, the central bank again left the official cash rate on hold at a record low 2.5 per cent, meaning the rate has now been steady for an entire year. The RBA said GDP growth was likely to have slowed to a more moderate pace in the June quarter, after above-average growth in the March quarter on the back of a pick-up in non-mining activity. Non-mining investment doesn't appear ready to pick up the slack.

(Daily chart / 4 hourly chart below)

AUD/USD August 19 at 23:55 GMT 0.9299 H: 0.9305 L: 0.9296

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9300 0.9260 0.9220 0.9425 0.9500 -
Click to enlarge

During the early hours of the Asian trading session on Wednesday, the AUD/USD is threatening to break through the support level at 0.93, after recently falling sharply from above 0.9340. 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 0.9300.

Further levels in both directions:

• Below: 0.9300, 0.9260, and 0.9220.

• 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 eased back towards 50% as the Australian dollar has eased back down towards the 0.93 level. The trader sentiment remains slightly in favour of long positions.

Economic Releases

  • 00:30 AU Westpac-MI Leading Index (Jul)
  • 01:00 AU Internet Skilled Vacancies (Jul)
  • 04:30 JP All Industry activity index (Jun)
  • 10:00 UK CBI Industrial Trends (20th-25th) (Aug)
  • 12:30 CA Wholesale Sales (Jun)
  • 18:00 US Fed releases minutes from prior (Jul 29-30) FOMC meeting
  • UK BoE MPC minutes released

*All release times are GMT