AUD/USD – Relying Upon Support at 0.77

AUD/USD for Thursday, February 5, 2015

Over the last couple of days the Australian dollar has been on a rollercoaster ride dropping sharply to a new multi-year low below 0.7630 before rallying strongly and moving back up above the 0.77 level and more recently 0.78 before easing back again.  It is presently relying on support from the current key level at 0.77.  Prior to all the recent activity, in the last couple of weeks the Australian dollar fall very sharply and break lower from the trading range that had been established roughly between 0.8050 and 0.8200. 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.

Australia’s markets, which flagged an interest-rate cut most economists missed, are signaling two more reductions as the central bank seeks a weaker currency.  Futures contracts show about 80 percent odds Reserve Bank of Australia Governor Glenn Stevens will bring the target for overnight loans between banks down to 1.75 percent by year-end from 2.25 percent now. Stevens and his fellow policy makers reduced the rate by 25 basis points on Tuesday to a record and said the Australian dollar remains overvalued.  The RBA joined counterparts from Canada to Singapore to Russia in easing policy this year as tumbling commodity prices add to disinflationary pressures. The rate cut weakened the Aussie to within 1.5 U.S. cents of the 75 level Stevens said in December he prefers. Growth will be weaker for longer and the jobless rate will peak higher than earlier expected, he said after Tuesday’s decision.

(Daily chart / 4 hourly chart below)

AUD/USD February 5 at 01:10 GMT   0.7756   H: 0.7778   L: 0.7733

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 Thursday, the AUD/USD is drifting lower through the 0.7750 level likely on its way back towards the key support level at 0.77.  Current range: trading right around 0.7750.

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 fallen sharply back towards 50% as the Australian dollar has dropped sharply back under the resistance level at 0.82 and down to a multi-year low near 0.7600. The trader sentiment remains in favour of long positions.

Economic Releases

00:30 AU Retail trade (Dec)

08:00 UK Halifax House Price Index (5th-10th) (Jan)

09:00 EU EU Publishes Economic Forecasts

12:00 UK BoE MPC – APF Total (Feb)

12:00 UK BoE MPC – Base Rate

13:30 CA Merchandise Trade (Dec)

13:30 US Initial Claims (31/01/2015)

13:30 US Non Farm Productivity (Prelim.) (Q4)

13:30 US Trade Balance (Dec)

13:30 US Unit Labour Costs (Prelim.) (Q4)

UK BoE Monetary Policy Committee meeting and rate decision

* 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.

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