AUD/USD Remains Steady Above Support At 0.77

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Includes: CROC, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

AUD/USD for Friday, February 6, 2015

For the last week now, the Australian dollar has steadied a little and traded in a narrow range between support at 0.77 and 0.78. A few days ago, the Australian dollar was on a roller coaster ride dropping sharply to a new multi-year low below 0.7630 before rallying strongly and moving back up above the 0.77 level and more recently 0.78 before easing back again into its present range. It is presently relying on support from the current key level at 0.77. Prior to all the recent activity, in the last couple of weeks the Australian dollar fell very sharply and broke lower from the trading range that had been established roughly between 0.8050 and 0.8200. The 0.77 range is currently offering some support to the Australian dollar, which has allowed it to consolidate a little and temporarily stop the recent decline over the last couple of days. A few weeks ago, it made numerous attempts at the resistance level at 0.82 only to be sent back often before finally finishing that week moving through this key level. In doing so, it was able to reach a one-month high near 0.83 before being sold back down again towards 0.82 as the resistance and selling activity above this level kicked in.

Over the Christmas / New Year period, the Australian dollar seemed to have been content with trading in a narrow range below the resistance at 0.82, which continues to remain a key level as it presently provides resistance. The Australian dollar experienced a disappointing November and December moving from resistance around 0.88 down to the new lows recently. For a couple of months from September through to November, the Australian dollar did well to stop the bleeding and trade within a range between 0.8650 and 0.88 after experiencing a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650. Back at the beginning of September, the Australian dollar showed some positive signs as it surged higher again bouncing off support below 0.93 and reaching a new four-week high around 0.94; however, that all now seems a distant memory.

It seems a long way away now but the Australian dollar reached a three-week high just shy of 0.9480 at the end of July 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.

Australia's markets, which flagged an interest rate cut most economists missed, are signaling two more reductions as the central bank seeks a weaker currency. Futures contracts show about 80 percent odds Reserve Bank of Australia Governor Glenn Stevens will bring the target for overnight loans between banks down to 1.75 percent by year-end from 2.25 percent now. Stevens and his fellow policy makers reduced the rate by 25 basis points on Tuesday to a record and said the Australian dollar remains overvalued. The RBA joined counterparts from Canada to Singapore to Russia in easing policy this year as tumbling commodity prices add to disinflationary pressures. The rate cut weakened the Aussie to within 1.5 U.S. cents of the 75 level Stevens said in December he prefers. Growth will be weaker for longer and the jobless rate will peak higher earlier than expected, he said after Tuesday's decision.

(Daily chart / 4 hourly chart below)

AUD/USD February 5 at 22:35 GMT 0.7798 H: 0.7824 L: 0.7733

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.7700 - - 0.8200 0.8650 0.8800

During the early hours of the Asian trading session on Friday, the AUD/USD is trading in a narrow range roughly between 0.7800 and 0.7820 after rallying a little higher from near 0.7750. Current range: trading right around 0.7800.

Further levels in both directions:

• Below: 0.7700.

• Above: 0.8200, 0.8650, and 0.8800.

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 fallen sharply back to below 50% as the Australian dollar has dropped sharply back under the resistance level at 0.82 and down to a multi-year low near 0.7600 before rallying a little higher in the last couple of days. The trader sentiment remains in favour of long positions.

Economic Releases

  • 00:30 AU RBA statement on monetary policy
  • 05:00 JP Leading indicator (Prelim.) (Dec)
  • 09:30 UK Trade Balance (Non-EU) (Dec)
  • 09:30 UK Visible Trade Balance (World) (Dec)
  • 13:30 CA Building permits (Dec)
  • 13:30 CA Unemployment (Jan)
  • 13:30 US Non-farm & Private Payrolls (Jan)
  • 13:30 US Unemployment (Jan)
  • 20:00 US Consumer Credit (Dec)

* All release times are GMT