AUD/USD - Teasing Us As It Rallies Back Above Key 0.93 Level

Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Thursday, September 4, 2014

As quickly as the Australian dollar fell sharply back down below the 0.93, it has surged back higher just as quickly to return to its previous levels around 0.9340. It enjoyed a solid week last week moving up from below 0.9300 to a three week high around 0.9370 before easing a little lower to finish the week. It started this new week in similar fashion easing lower before falling sharply a couple of days ago. For the best part of the last few weeks the Australian dollar has traded close and around the 0.93 level after spending the preceding few weeks drifting lower from near 0.95. A couple of weeks ago it fell lower to below the 0.93 level level and down towards a two month low near 0.9220, before rallying well to return to the 0.93 level. Throughout July it generally slid lower from close to 0.95 down to its present trading levels around 0.93. 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. Several 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 a month 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.

Australia's economy is slowly shifting from its dependence on mining-led growth, but its recovery remains fragile. The economy grew by 0.5 per cent in the June quarter, taking GDP growth in the 12 months to June to 3.1 per cent, seasonally adjusted. An AAP survey of 15 economists showed GDP was expected to rise by 0.4 per cent in the June quarter for an annual rate of 3.0 per cent. JP Morgan economist Tom Kennedy said the figures were broadly consistent with the Reserve Bank's expectations. The data suggests the economy was transitioning, but the recovery remained fragile, he said. "The RBA have said that the second quarter would be a bit distorted because of a payback in net trade and we saw that, but we also saw a very strong uptick in inventory accumulation - which are products that firms created but didn't sell," Mr Kennedy said. "That category added 0.9 per cent to growth, and growth in the quarter was only 0.5 per cent, so that means essentially that everything else is pretty soft and a lot of that weakness was due to trade.

(Daily chart / 4 hourly chart below)

AUD/USD September 3 at 23:45 GMT 0.9342 H: 0.9351 L: 0.9263

AUD/USD Technical

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

During the early hours of the Asian trading session on Thursday, the AUD/USD is trading in a narrow range between 0.9340 and 0.9350 after enjoying a surge higher in the last 24 hours to back above 0.93. 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 0.9340.

Further levels in both directions:

• Below: 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% again as the Australian dollar has rallied back above the 0.93 level. The trader sentiment remains in favour of long positions.

Economic Releases

  • 23:30 (Wed) AU AIG Construction PMI (Aug)
  • 01:30 AU Retail trade (Jul)
  • 01:30 AU Trade Balance (Jul)
  • 11:00 UK BoE MPC - APF Total (Sep)
  • 11:00 UK BoE MPC - Base Rate
  • 11:00 UK BoE Monetary Policy Committee meeting and rate decision
  • 11:45 EU ECB - Rate Announcements (Sep)
  • 12:15 US ADP Employment Survey (Aug)
  • 12:30 CA Merchandise Trade (Jul)
  • 12:30 US Initial Claims (30/08/2014)
  • 12:30 US Non Farm Productivity (Final) (Q2)
  • 12:30 US Trade Balance (Jul)
  • 12:30 US Unit Labour Costs (Final) (Q2)
  • 14:00 US ISM Non-Manufacturing (Aug)

* All release times are GMT