AUD/USD: Drops To New Multi-Year Low Near 0.7850

AUD/USD for Tuesday, January 27, 2015

The last week 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 0.7850 in the last day. A couple of 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. A few weeks ago it drifted lower to a then multi-year low near 0.8030 before rallying higher. That low has now been broken over the last week and the area around 0.8000 to 0.8050 may now provide some 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 Aussie dollar’s slide below 80 U.S. cents for the first time since 2009 is being fueled by speculation the central bank will need to reduce borrowing costs from a record low. The Bank of Canada’s surprise interest-rate cut and the European Central Bank’s quantitative-easing program have raised the odds of looser monetary policy in Australia. Traders on Thursday saw a 40 percent chance the Reserve Bank of Australia will cut rates at this year’s first policy meeting on Feb. 3, up from 25 percent odds on Jan. 16, according to overnight interest rate swaps. Currency traders turned the most bearish on the Aussie in more than a year, options show. While Australia’s central bank has kept its key rate at 2.5 percent for 17 months, the benchmark is at least 1.25 percentage points higher than any other major developed economy outside New Zealand. Australia has been struggling with the end of a once-in-a-century resources boom and a slowdown in China, which buys more than 35 percent of its overseas shipments.

AUD/USD January 26 at 21:45 GMT 0.7920 H: 0.7933 L: 0.7858

AUD/USD Technical

During the early hours of the Asian trading session on Tuesday, the AUD/USD is trading in a narrow range around 0.7920 after dropping sharply from back above the key 0.82 level down to a new multi-year low near 0.7850. Current range: trading right above 0.7900 around 0.7920.

Further levels in both directions:

• Below: 0.7850.

• 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 moved back to 60% as the Australian dollar has dropped sharply back under the resistance level at 0.82 and down to a multi-year low around 0.7850. The trader sentiment remains in favour of long positions.

Economic Releases

• 00:30 AU NAB Business Confidence & Conditions (Dec)
• 08:00 EU EU Finance Ministers Hold Meeting in Brussels
• 09:30 UK GDP (1st Est.) (Q4)
• 09:30 UK Index of Services (Nov)
• 13:30 US Durable goods (Dec)
• 14:00 US S&P Case-Shiller Home Price (Nov)
• 15:00 US Consumer Confidence (Jan)
• 15:00 US New Home Sales (Dec)
• US Federal Reserve FOMC meeting (to 28th)

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