AUD/USD – Consolidating Just Below 0.85 after New Lows

AUD/USD for Tuesday, December 2, 2014

The Australian dollar hasn’t had a great last couple of weeks as it has dropped sharply and fallen to a new multi-year low to start this week around 0.8420 before rallying a little and consolidating just shy of 0.85.  During the middle of last week it enjoyed some solid support from 0.85, however this has given way to overwhelming supply. To start last week it rallied back above 0.8650 again before falling lower throughout the rest of the week. In the week prior the Australian dollar was 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. The resistance level at 0.88 has stood tall on numerous occasions over the last few months. 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.

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.

Australia’s central bank faces pressure to resume interest-rate cuts as the economy suffers for its dependence on iron ore, which accounts for more than $1 out of every $5 of export income.  Traders see 64 percent odds Governor Glenn Stevens will cut the overnight cash rate target by a quarter percentage point to 2.25 percent within 12 months, the strongest chance since September 2013, a Credit Suisse Group AG index based on swaps shows. Money markets and economists see no move at tomorrow’s Reserve Bank of Australia meeting.  “The risks for the Australian economy are tilting to the downside,” said Guy Bruten, an economist at AllianceBernstein. “There’s a growing prospect that the RBA may well need to cut” as analysts are underestimating a collapse in commodity prices that is likely to be “deeper and broader” than expected, he said.

(Daily chart / 4 hourly chart below)

AUD/USD December 2 at 01:05 GMT   0.8485   H: 0.8504   L: 0.8475

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8400

—

—

0.8650

0.8800

0.9000

During the early hours of the Asian trading session on Tuesday, the AUD/USD is trying to consolidate and stop the bleeding after starting the week falling sharply down to new multi-year lows below 0.8430.  Current range: trading just below 0.85 around 0.8490.

Further levels in both directions:

• Below: 0.8400.

• 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 dropped sharply back towards 60% as the Australian dollar has steadied a little just below the key 0.85 level.  The trader sentiment remains in favour of long positions.

Economic Releases

00:30 AU Building approvals (Oct)

00:30 AU Current Account (Q3)

00:30 AU Net Exports of GDP (Q3)

03:30 AU RBA – Overnight Rate

09:30 UK CIPS/Markit Construction PMI (Nov)

10:00 EU PPI (Oct)

15:00 US Construction Spending (Oct)

US Vehicle Sales (Nov)

* 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.