AUD/USD – Looking for Support from 0.80

AUD/USD for Monday, May 18, 2015

The Australian dollar enjoyed a solid week last week which culminated in a new three month high above 0.8150 in the middle of last week.  It is presently looking for support from the 0.80 level.  The last few weeks has seen the Australian dollar on a roller-coaster ride moving from below 0.78 and up to near 0.82.  A couple of weeks ago 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 between 0.7850 and 0.79 to finish out the week.  A few weeks ago it enjoyed a solid start to the week, moving to a three month high just shy of 0.81. It then eased back towards the key 0.7850 level again where it received some support.

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.

The threat of early elections has driven Australia’s ruling conservative government to cater the budget to its core constituencies, small businesses and middle class families with children, at the expense of structural reforms, analysts said. “It looks like an election budget – the government has substantially spent on this budget and pushed off returning to a surplus into the distance,” University of Sydney’s lecturer in politics & public policy, Peter Chen, told CNBC. “This is not an economists’ budget but a political budget…and all the major provisions are aimed at the coalition’s base.” For more than a decade, Australia’s economy has been fuelled by a mining boom – but a collapse in commodity prices is slowing economic growth and reducing tax receipts.

(Daily chart / 4 hourly chart below)

AUD/USD May 18 at 00:30 GMT   0.8011   H: 0.8052   L: 0.8005

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8000

0.7850

0.7700

0.8200

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During the early hours of the Asian trading session on Monday, the AUD/USD is moving back to support right at 0.80.  Current range: trading right above 0.80.

Further levels in both directions:

• Below: 0.8000, 0.7850, and 0.7700.

• Above: 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 above 55% as the Australian dollar has consolidated just under the 0.81 level. The trader sentiment is in favour of long positions, but only just.

Economic Releases

01:30 AU New motor vehicle sales (Apr)

04:30 JP Industrial Production (Final) (Mar)

04:30 JP Capacity Utilisation (Mar)

14:00 US NAHB Builders survey (May)

* 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.