AUD/USD – Resistance at 0.77 Has its Way Again

AUD/USD for Friday, March 20, 2015

The Australian dollar has been on quite a journey the last couple of days surging higher back through the key 0.77 level but only to run into the previously well established resistance level at 0.7850.  Since then it has returned to back under the 0.77 level where it is presently trading in a narrow range around 0.7650.  Over the last week or so the Australian dollar has made a statement and broken down strongly through the key 0.77 level which is now providing significant resistance.  It has been able to enjoy some short term support around 0.7550 which may be called upon again shortly if it continues to drift lower. At the moment it is providing some hope and keeping the sellers at bay. A few weeks ago the Australian dollar made repeated attempts to move up strongly to the resistance level at 0.7850 however it was rejected every time and sent back easing lower. For over a month it traded within the well established trading range between 0.77 and 0.7850 and many will be hoping it is able to rally and get back within this range. A few weeks ago the Australian dollar moved through the resistance at 0.7850 to reach a new four week high around 0.7900.

In the second half of January, the Australian dollar fell very sharply and break lower from the trading range that had been established roughly between 0.8050 and 0.8200. Back in mid-January 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.

The Reserve Bank of Australia decided to wait for more economic data before making a further cut to the official cash rate, after facing concerns about speculative lending. Concerns about speculative borrowing and lending, where credit had continued to grow faster than incomes, caused the board to wait for more data before making another rate move, according to minutes of the RBA’s March meeting, when the board kept rates on hold. The RBA saw advantages in receiving more data to indicate whether or not the economy was on the previously forecast path, before moving the cash rate again, as the board members faced a “greater degree of uncertainty about the behaviour of borrowers and savers in a world of very low interest rates”. The board has kept open the opportunity for further rate cuts, arguing that the case to ease monetary policy further might emerge, but members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change. The RBA held the official cash rate at its record low level of 2.25 per cent at the March meeting after a surprise February rate-cut, bucking the general consensus that the bank tends to deliver cuts in pairs. The March decision sent the sharemarket reeling and rallied the Australian dollar against the US currency.

(Daily chart / 4 hourly chart below)

AUD/USD March 19 at 22:30 GMT   0.7649   H: 0.7808   L: 0.7611

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.7550

—

—

0.7700

0.7850

0.8200

During the early hours of the Asian trading session on Friday, the AUD/USD is trading in a narrow range right around 0.7650 after easing lower from above 0.7850 over the last day or so. Current range: trading right around 0.7650.

Further levels in both directions:

• Below: 0.7550.

• Above: 0.7700, 0.7850, and 0.8200.

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 shot up to around 60% as the Australian dollar has eased away again from the new resistance level at 0.7700. The trader sentiment has shifted to being in favour of long positions.

Economic Releases

09:00 EU Current Account (sa) (Jan)

09:30 UK Public Borrowing (PSNB ex banks) (Feb)

12:30 CA CPI (Feb)

12:30 CA Retail Sales (Jan)

JP BoJ release minutes

* 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.