AUD/USD – Eases to 0.79 with Eyes on 0.7850

AUD/USD for Friday, May 8, 2015

Earlier this week the Australian dollar surged higher however it ran into resistance right around 0.7950 and 0.80 before easing slightly and consolidating in a narrow range around 0.7980.  It has now eased again and rests on 0.79.  After a solid start to last week, the Australian dollar eased back towards the key 0.7850 level where it has received some support to close out last week and to begin this week before its recent surge higher. In its early week surge last week, it moved to a three month high just shy of 0.81. Throughout most of the last few weeks the Australian dollar enjoyed a strong surge higher to the three month high at 0.8075. To start last week the Australian dollar looked poised to break through the long standing resistance level at 0.7850 even though this level has stood up tall for several months now. A couple of weeks ago the Australian dollar fell sharply but landed on the previous key level at 0.77 which has offered considerable support since that time. A few weeks ago saw the Australian dollar enjoy a solid week moving off support around 0.76 to reach a three week high just shy of the resistance level at 0.7850. In doing so, it moved through the key resistance level at 0.77.

Since the beginning of March the Australian dollar has relied heavily on support at the 0.76 level. Below 0.76 its next obvious support level is down at 0.7550 and it will hoping to be propped up by it. Back in early March the Australian dollar made a statement and broke down strongly through the key 0.77 level which then provided significant resistance for the following few days. It was also able to enjoy some short term support around 0.7550 which propped it up and allowed it to rally strongly back up to above 0.79. Throughout February 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, which is why this level remains significant presently. Just prior to that towards the end of February 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.

Australian employers unexpectedly cut jobs in April as a mining investment boom unwinds and a resilient currency weakens the competitiveness of local industries.  The number of people employed fell by 2,900 from a month earlier, compared with economists’ forecasts for a 4,000 gain, government data showed Thursday. The jobless rate rose to 6.2 percent from 6.1 percent.  The central bank reduced interest rates to a record 2 percent this week to help offset the currency’s strength amid predictions that industries outside the resources sector aren’t investing sufficiently to pick up slack in the economy. Australia is on track to grow below its potential rate for six of the past seven years.  The data “supports the RBA’s decision this week to reduce the cash rate,” Aberdeen Asset Management Senior Investment Manager David Choi said in an e-mail. “It points to the continued fragility of the Australian economy. We expect the RBA to cut rates further to boost consumption, in the medium term.”

(Daily chart / 4 hourly chart below)

AUD/USD May 8 at 00:10 GMT   0.7906   H: 0.8004   L: 0.7890

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.7850

0.7700

0.7600

0.7950

0.8200

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During the early hours of the Asian trading session on Friday, the AUD/USD is consolidating in a narrow range right around 0.79.  Current range: trading right above 0.79.

Further levels in both directions:

• Below: 0.7850, 0.7700, and 0.7600.

• Above: 0.7950 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 moved back to near 50% as the Australian dollar has eased back towards 079.  The trader sentiment is in favour of short positions.

Economic Releases

01:30 AU RBA release Statement on Monetary Policy

08:30 UK Trade Balance (Non-EU) (Mar)

08:30 UK Visible Trade Balance (World) (Mar)

12:15 CA Housing starts (Apr)

12:30 CA Unemployment (Apr)

12:30 US Non-farm & Private Payrolls (Apr)

12:30 US Unemployment (Apr)

14:00 US Wholesale Inventories (Mar)

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.