AUD/USD: Looking To Retest Support At 0.8650

Published 10/15/2014, 12:55 AM

AUD/USD for Wednesday, October 15, 2014

The last month has not been an enjoyable time for the Australian dollar as it endured a strong decline moving from close to 0.94 down to below 0.8650 and an eight month low in the process. For the last couple of weeks it has taken a breather mainly between 0.87 and 0.88. Even though it has met significant resistance at the 0.88 level, it was able to move through to a two week high above 0.8900 towards the end of last week before recently falling sharply below 0.87 again to finish out last week. The resistance level at 0.88 remains a factor and is continuing to place downwards pressure on price, however more recently all eyes have turned on to the support level at 0.8650 to see if the Australian dollar can remain above.  Several weeks ago the Australian dollar found some much needed support at 0.8950 and rallied back up to just shy of the key 0.90 level before resuming its decline. The long term key level at 0.90 was called upon to desperately provide some much needed support to the Australian dollar, which it did a little a few weeks ago, however it has more recently provided resistance.

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. 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.

After the Australian dollar had enjoyed a solid surge in the first couple of weeks of June which returned it to the resistance level around 0.9425, it then fell sharply away from this level back to a one week low around 0.9330 before rallying higher yet again. Its recent surge higher to the resistance level around 0.9425 was after spending a couple of weeks at the end of May trading near and finding support at 0.9220. Throughout April and into May the Australian dollar drifted lower from resistance just below 0.95 after reaching a six month high in that area and down to the recent key level at 0.93 before falling lower. During this similar period the 0.93 level has become very significant as it has provided stiff resistance for some time. The Australian dollar appeared to be well settled around 0.93 which has illustrated the strong resurgence it has experienced throughout this year.

Australia’s currency remains overvalued on most measures while any sell-off in global fixed-income markets could be “relatively violent,” central bank Assistant Governor Guy Debelle said in a speech.  “The Australian dollar is still higher than most conventional estimates of fundamentals would indicate, notwithstanding its recent decline,” Debelle said in the text of a speech in Sydney today. “The exchange rate is thus offering less assistance than would normally be expected in achieving balanced growth in the Australian economy. A lower exchange rate would be helpful in achieving that objective.”  Debelle’s address focused on the market’s failure to react in a sustained way to instability in the Middle East and eastern Europe, uncertainty about the turning point in U.S. monetary policy, the future direction of policy in Japan and Europe and concern about the strength of China’s economy. Investors may have been pacified by central banks’ increased forward guidance for interest rates, he said in the text of his speech.

AUD/USD Daily Chart AUD/USD 4 Hour Chart

AUD/USD October 14 at 23:30 GMT   0.8711   H: 0.8720   L: 0.8709

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8650 0.8800 0.9000 0.9100

During the early hours of the Asian trading session on Wednesday, the AUD/USD is slowly but surely easing back towards 0.8700 after recently rallying well up to close to the resistance level at 0.88. The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents and it has done very well to recover slightly to near 0.95 again earlier this year. Current range: trading right around 0.8710.

Further levels in both directions:

• Below: 0.8650.

• Above: 0.8800, 0.9000, and 0.9100.

OANDA’s Open Position Ratios

AUD/USD 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 up close to 70% as the Australian dollar has eases back towards 0.87 again. The trader sentiment remains in favour of long positions.

Economic Releases

  • 21:30 (Tue) NZ BNZ-Business NZ PMI (Sep)
  • 00:30 AU New motor vehicle sales (Sep)
  • 04:30 JP Capacity Utilisation (Aug)
  • 04:30 JP Industrial Production (Final) (Aug)
  • 08:30 UK Average Earnings (incl. bonus) (Aug)
  • 08:30 UK Claimant Count Change & Rate (Sep)
  • 08:30 UK ILO Unemployment Rate (Aug)
  • 12:30 US Empire State Survey (Oct)
  • 12:30 US PPI (Sep)
  • 12:30 US Retail Sales (Sep)
  • 14:00 US Business inventories (Aug)
  • 18:00 US US Federal Reserve releases Beige Book Report
  • EU ECB Governing Council hold non-rate setting meeting

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