AUD/USD – Drops Further Again to Near 0.83

AUD/USD for Monday, December 8, 2014

The last few weeks is a period the Australian dollar would rather forget as it has continued to decline and move to multi-year lows near 0.83 to finish last week.  A couple of weeks ago it enjoyed some temporary support from 0.85, however this eventually gave way to overwhelming supply.  To start that 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 move 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, however this has all been for nothing over the last couple of weeks.

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.

Australian construction activity took a tumble in November, adding to concerns about the health of the economy.  The construction industry contracted for the first time since May, according to figures from the Australian Industry Group and Housing Industry Association.  The Performance of Construction Index dropped eight points to 45.4 in November – below the 50 level that separates expansion from contraction.  A slowdown in public building activity and demand for housing were weighing on the industry, with the reduced workload forcing job losses, the report said.  The disappointing report comes after official figure showed a shock slowdown in the Australian economy in the September quarter, sparking debate about whether the cash rate should be slashed to a new record low.  Growth in house and apartment building decelerated in November, amid a decline in new orders, the report said.  Home building will need to accelerate in coming months if it’s to help offset the slowdown in mining construction.

(Daily chart / 4 hourly chart below)

AUD/USD December 7 at 21:55 GMT   0.8322   H: 0.8393   L: 0.8315

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8300

—

—

0.8650

0.8800

0.9000

During the early hours of the Asian trading session on Monday, the AUD/USD is trading in a narrow range between 0.8320 and 0.8330 after finishing last finishing lower down near 0.8320.  Current range: trading right below 0.8330.

Further levels in both directions:

• Below: 0.8300.

• 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 edged up towards 70% as the Australian dollar has dropped to another multi-year low near 0.83.  The trader sentiment remains in favour of long positions.

Economic Releases

23:50 (Sun) JP M2 Money Supply (Nov)

00:30 AU ANZ Job Ads (Nov)

06:00 JP Economy Watchers Survey (Nov)

09:30 EU Sentix Indicator (Dec)

11:00 UK CBI Industrial Trends (8th-12th) (Dec)

13:00 EU Euro-Area Finance Ministers Meet in Brussels

13:15 CA Housing starts (Nov)

13:30 CA Building permits (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.