AUD/USD – Now Meeting Resistance at 0.8650

AUD/USD for Friday, November 21, 2014

In the last couple of days the Australian dollar has dropped sharply back through the support level at 0.8650 and is now threatening to remain below this level.  It has rallied higher in the last 12 hours or so however it has met resistance at the key 0.8650 level.  Prior to the strong fall, over the last week or so the Australian dollar has been able to rally higher and bounce off multi year lows around 0.8550 and in doing so has moved back within the previously well established trading range between 0.8650 and 0.88. A few days ago the Australian dollar ran into the resistance level at 0.88 again which stood tall and sent prices lower again. A couple of weeks ago it fell sharply from above the resistance level at 0.88 back down to the support level of 0.8650 before crashing further to a new multi-year high near 0.8550. During the last couple of months the Australian dollar has done well to stop the bleeding and trade within this range after experiencing a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650 and a then eight month low in the process. 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 hold on and stay within reach again.

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.

The RBA’s attempts to cool the country’s housing market could significantly hurt consumer demand, according to research from Moody’s Analytics.  Australia’s central bank underestimates the tight relationship between consumption and house prices, Moody’s said in a report, noting that housing currently accounts for 55 percent gross household assets, well above the global average. By comparison, housing constitutes 25 percent of U.S. household wealth.  “Consumer spending has steadily accelerated over the past 12 months… a lot of the consumption lift is thanks to rising house prices, and without it, demand could be considerably weaker,” the report said.

(Daily chart / 4 hourly chart below)

AUD/USD November 20 at 21:25 GMT   0.8629   H: 0.8641   L: 0.8566

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8560

—

—

0.8650

0.8800

0.9000

During the early hours of the Asian trading session on Friday, the AUD/USD is easing away lower after running into resistance at the key 0.8650 level.  Current range: trading right around 0.8630.

Further levels in both directions:

• Below: 0.8560.

• Above: 0.8650, 0.8800, and 0.9000.

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 up above 65% as the Australian dollar has fallen back through the support level at 0.8650. The trader sentiment remains in favour of long positions.

Economic Releases

09:30 UK PSNB ex Banking Groups

13:30 CA CPI (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.