AUD/USD – Taking a Rest Around 0.8750

AUD/USD for Thursday, October 2, 2014

The last few weeks has seen a strong decline for the Australian dollar moving from close to 0.94 down to below 0.87 and an eight month low in the process. In the last few days it has taken a breather above 0.87 around 0.8750.  A couple of 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 couple of weeks ago, however it has more recently provided resistance. Several weeks ago 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.

Australian home price rises are easing from their double-digit gains, after most capital cities recorded price falls in September.  Home values were virtually flat last month, rising by just 0.1 per cent, but were up 9.3 per cent for the year to September.  In the 2013/14 financial year prices rose 10.1 per cent.  The weaker result in September was caused by falls in prices in five of the eight capital cities, the RP Data Rismark Home Value Index showed on Wednesday.  Darwin had the biggest fall, followed by Melbourne, Canberra and Perth.  Adelaide recorded the strongest growth at 0.9 per cent.  But home prices in the nation’s largest city remained strong, with Sydney posting a gain of 0.8 per cent in the month and 14 per cent for the year.  Sydney was again the most expensive city to buy a home, with a median price of $655,000, more than double the $300,000 recorded in Hobart.  RP Data research director Tim Lawless said the easing of home prices in September should be welcomed by the Reserve Bank, which has flagged concerns about rises in Sydney and Melbourne as well as speculative property investors.

(Daily chart / 4 hourly chart below)

AUD/USD October 1 at 23:40 GMT   0.8730   H: 0.8750   L: 0.8663

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8700

—

—

0.9000

0.9100

0.9425

During the early hours of the Asian trading session on Thursday, the AUD/USD is consolidating right around 0.8750 after recently rallying higher from around 0.8700. 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 0.8750.

Further levels in both directions:

• Below: 0.8700.

• Above: 0.9000, 0.9100 and 0.9425.

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 edged slightly higher above 60% as the Australian dollar consolidates around 0.8750. The trader sentiment remains in favour of long positions.

Economic Releases

23:30 (Wed) AU AIG Services PMI (Sep)

01:30 AU Building approvals (Aug)

01:30 AU Trade Balance (Aug)

08:30 UK CIPS/Markit Construction PMI (Sep)

09:00 EU PPI (Aug)

11:45 EU ECB – Rate announcements (Oct)

12:30 US Initial Claims (27/09/2014)

14:00 US Factory Orders (Aug)

* 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.