AUD/USD – Rallies to Two Week High Above 0.8850

AUD/USD for Wednesday, October 29, 2014

In the last 24 hours the Australian dollar has finally got into action and surged through the resistance level at 0.88 in moving to a two week high around 0.8880.   For the last 12 hours or so since, it has steadied and consolidated around 0.8860.   During the last few month the Australian dollar has done well to stop the bleeding and trade within a wide range roughly between 0.8650 and 0.88. Prior to that it had experienced a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650 and an eight month low in the process. Despite the current resistance at 0.88, it was able to move through to a two week high above 0.8900 a few weeks ago before recently falling sharply below 0.87 again. The resistance level at 0.88 remains a factor and is continuing to place downwards pressure on price, however more recently all eyes have turned on to the support level at 0.8650 to see if the Australian dollar can remain above it. Several weeks ago the Australian dollar found some much needed support at 0.8950 and rallied back up to just shy of the key 0.90 level before resuming its decline. The long term key level at 0.90 was called upon to desperately provide some much needed support to the Australian dollar, which it did a little a few weeks ago, however it has more recently provided resistance.

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. 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.

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. 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.

Not even super-low interest rates are tempting consumers and businesses out of spending hibernation in Australia. Business confidence was flat in the September quarter, according to figures from the National Australia Bank last Thursday. Forward orders eased, suggesting sluggish domestic demand, and while business conditions did rise, most of the gains came from a surprise jump in July which had since eased off, the report said. NAB chief economist Alan Oster said expectations of any significant rebound in domestic demand were premature. “Both consumers and business remain cautious about spending, despite encouragement from very low interest rates, which is unsurprising given slower rates of income growth,” he said. “Consequently, corporate leverage ratios are low and household savings rates remain high, although there have been signs of improvement more recently.” On the plus side, strong residential construction, boosted by low interest rates and strong investor demand, including foreign investors, would have flow-on effects to the rest of the economy, Mr Oster said. Recent falls in the Australian dollar would also help export competitiveness, but could have a negative impact for some businesses, he said.

(Daily chart / 4 hourly chart below)

AUD/USD October 29 at 01:15 GMT   0.8860   H: 0.8869   L: 0.8849

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8650

—

—

0.8800

0.9000

0.9100

During the early hours of the Asian trading session on Wednesday, the AUD/USD is remaining quite steady around 0.8860 after recently rallying higher through the resistance level at 0.8800 again after finishing last week meeting significant resistance there. 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 near 0.95 again earlier this year. Current range: trading right around 0.8860.

Further levels in both directions:

• Below: 0.8650.

• Above: 0.8800, 0.9000, and 0.9100.

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 towards 60% as the Australian dollar has crept back above the resistance level at 0.88 again. The trader sentiment remains in favour of long positions.

Economic Releases

20:00 (Tue) NZ RBNZ – Cash Rate (Sep)

23:30 (Tue) AU Import & Export Price Index (Q3)

09:30 UK BoE – Mortgage Approvals (Sep)

09:30 UK BoE – Net Consumer Credit (Sep)

09:30 UK BoE – Secured Lending (Sep)

09:30 UK M4 Money Supply (Sep)

12:30 CA Industrial product price index (Sep)

12:30 CA Raw Materials Price Index (Sep)

18:00 US FOMC – Fed Funds Rate (Oct)

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.