AUD/USD: Has Eyes Back On Support At 0.77 Again

AUD/USD for Tuesday, March 3, 2015

After finally springing to life in the middle of last week, the Australian dollar dropped sharply to close out the week and fall back down below 0.7800 again to more familiar territory below the resistance level at 0.7850. It now seems to have eyes firmly on the support level at 0.77 again. During last week the Australian dollar moved through the resistance at 0.7850 to reach a new four week high around 0.7900. For the last month the Australian dollar has steadied well and traded in a narrow range between support at 0.77 and 0.78, although a couple of weeks ago it rallied higher to a two week high near 0.7850. To start last week it slowly eased back a little from resistance at 0.7850 however it is finally made its way through there. It has enjoyed receiving solid support from the 0.77 level throughout this time and will be looking to receive further support in the coming days. A few weeks ago it rallied a little higher again back towards 0.78 however it then eased back to receive more support from 0.77. Several weeks ago the Australian dollar was on a roller-coaster 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.

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.

Australia’s central bank will consider cutting interest rates later today to hold down a currency whose resilience threatens to upend any hopes of an economic recovery. Traders are pricing in a 60 percent chance the Reserve Bank of Australia will lower the 2.25 percent cash rate to a record 2 percent, swaps data compiled by Bloomberg show. Eighteen of 29 economists in a Bloomberg News survey predict a cut. RBA board member John Edwards said in a Feb. 17 interview that “an even lower dollar” would be useful as the currency posted its first monthly gain since October. Policy makers are seeking to bring down unemployment from a 12 1/2-year high after business spending slumped in an economy struggling to find new avenues of growth as miners curb expansion. RBA Governor Glenn Stevens’s global counterparts are easing to counter global disinflation, threatening to drive up the Aussie further and hurt domestic industries.

(Daily chart / 4 hourly chart below)

AUD/USD March 2 at 21:45 GMT 0.7767 H: 0.7809 L: 0.7756

AUD/USD Technical

During the early hours of the Asian trading session on Tuesday, the AUD/USD is easing a little lower back towards 0.7760 after finishing last week below the resistance level of 0.7850. Current range: trading right below 0.7800 around 0.7770.

Further levels in both directions:

• Below: 0.7700.

• Above: 0.7850, 0.8200, and 0.8650.

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 moved back below the resistance level at 0.7850. The trader sentiment has shifted to being in favour of long positions.

Economic Releases

• 00:30 AU Building approvals (Jan)
• 00:30 AU Current Account (Q4)
• 00:30 AU Net Exports of GDP (Q4)
• 03:30 AU RBA – Overnight Rate
• 09:30 UK CIPS/Markit Construction PMI (Feb)
• 10:00 EU PPI (Jan)
• 13:30 CA GDP (Dec)
• 13:30 CA Industrial product price index (Jan)
• 13:30 CA Raw Materials Price Index (Jan)
• 15:00 US IBD Consumer Optimism (Mar)
• AU RBA holds interest rate meeting
• US Vehicle Sales (Feb)

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