AUD/USD – Rallies Well to Back Above 0.78

AUD/USD for Tuesday, February 3, 2015

The last couple of weeks has seen the Australian dollar fall very sharply and break lower from the trading range that had been established roughly between 0.8050 and 0.8200. This has resulted in a new multi-year low near 0.7700 to close out last week. The 0.77 range is currently offering some support to the Australian dollar which has allowed it to consolidate a little and temporarily stop the recent decline over the last couple of days.  A few weeks ago it made numerous attempts at the resistance level at 0.82 only to be sent back often before finally finishing that week moving through this key level. In doing so it was able to reach a one month high near 0.83 before being sold back down again towards 0.82 as the resistance and selling activity above this level kicked in. Over the Christmas / New Year period, the Australian dollar seemed to have been content with trading in a narrow range below the resistance at 0.82, which continues to remain a key level as it is presently provides resistance.

The Australian dollar experienced a disappointing November and December moving from resistance around 0.88 down to the new lows recently. For a couple of months from September through to November, the Australian dollar did well to stop the bleeding and trade within a range between 0.8650 and 0.88 after experiencing a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650. 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.

It seems a long way away now but 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.

Speculation is high that the RBA will be the next central bank to ease monetary policy at its meeting this week following a month of surprise policy changes across the globe.  January saw unexpected loosening measures from a handful of central banks including Denmark, India and Singapore against a backdrop of increasing deflationary pressures as crude oil prices continue their descent.  The RBA has held rates at 2.5 percent since August 2013.  Many analysts expect the RBA to announce a 25 basis-point interest rate cut at Tuesday’s policy meeting to tackle 6 percent unemployment and sliding iron ore prices, one of the country’s biggest exports.

(Daily chart / 4 hourly chart below)

AUD/USD February 3 at 01:50 GMT   0.7815   H: 0.7833   L: 0.7789

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.7700

—

—

0.8200

0.8650

0.8800

During the early hours of the Asian trading session on Tuesday, the AUD/USD is trading in a narrow range above 0.7800 and 0.7820 after dropping sharply throughout last week down to new multi-year lows.  Current range: trading right above 0.7800 at 0.7820.

Further levels in both directions:

• Below: 0.7700.

• Above: 0.8200, 0.8650, and 0.8800.

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 eased back under 60% as the Australian dollar has dropped sharply back under the resistance level at 0.82 and down to a multi-year low near 0.7700. The trader sentiment remains in favour of long positions.

Economic Releases

00:30 AU Building approvals (Dec)

00:30 AU Trade Balance (Dec)

03:30 AU RBA – Overnight Rate

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

10:00 EU PPI (Dec)

13:30 CA Industrial product price index (Dec)

13:30 CA Raw Materials Price Index (Dec)

15:00 US Factory Orders (Dec)

15:00 US IBD Consumer Optimism (Feb)

AU RBA holds interest rate meeting

US Vehicle Sales (Jan)

* 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.

OANDA MarketPulse Nominated for FXstreet’s 2015 Forex Best Awards

We are pleased to share the news that FXstreet – Europe’s oldest forex trading portal, published online in more than 50 countries – has nominated your MarketPulse team for the “Best Sell-Side Analysis Team” award again this year (the winners in 2014!), as well as in the category of “Best Analysis”.

The annual Forex Best Awards highlight the best analysis, educational content, and contributors on its website from the preceding year. It is a tremendous honour to be considered for this industry accolade out of the thousands of top tier banks and financial blogs online.

However, in order to win these important awards, we need your help – we need you to vote for us.