AUD/USD: Poised For Another Run At Resistance At 0.9425

AUD/USD for Thursday, June 26, 2014

In the last couple of days the Australian dollar has fallen sharply away from the resistance level at 0.9425 after spending some time to move higher through this level, however in recent hours it has rallied back towards this level.   At the start of this week the Australian dollar surged higher and reached a two month higher before succumbing to the resistance at 0.9425 and easing lower.  It did well at the end of last week to make another run into the wall of resistance again at the 0.9425 level, although it finished out last week just easing away yet again.  After the Australian dollar had enjoyed a solid surge over over the few weeks which has returned it to a previous resistance level around 0.9425, it then fell sharply away from this level back to a one week low around 0.9330 in the middle of last week. 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.

The 0.9220 level has repeatedly reinforced its significance as it is again likely to support price should the Australia dollar retreat further. Only a month ago the Australian dollar was placing pressure on the resistance level at 0.94 when it was able to poke through for a short period and reach a four week high in the process, however in the last 24 hours it has surpassed those levels and achieved the two week high. 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. For the best part of February and March the Australian dollar did very little other than continue to trade around the 0.90 level, although at the beginning of March it crept a little lower down to a three week low below 0.89. Towards the end of March however, the Australian dollar surged higher strongly moving to the resistance level at 0.93 before consolidating for a week or so.

For several months either side of the New Year the Australian dollar established and traded within a narrow range roughly between 0.88 and the previous resistance level at 0.90. Back in January the Australian dollar was able to rally higher pushing through the resistance at 0.90 to a one month high near 0.91, however it quickly returned to more familiar territory below the resistance levels at 0.90 and 0.88. After showing some resilience in early December moving to a one week high above 0.9150, the AUD/USD spent the next two weeks turning around sharply and falling heavily down to a then three month low close to 0.88.

The RBA probably won't move interest rates after its policy meeting on Tuesday, but it could fire another shot in its war of words with the Australian dollar.  In October last year, the exchange rate headed back up towards 97 US cents after dipping below 90 in both July and August.  he central bank fired a warning shot, referring to it as "uncomfortably high".   The phrase was repeated in November and December but as the currency fell below 90 US cents again - dipping below 88 in late January - it was dropped after the RBA's first monetary policy meeting of 2014 in February.   "If sustained, a lower exchange rate would be expansionary for economic activity and assist in achieving balanced growth of the economy," the RBA said in minutes of the February meeting.   But it wasn't sustained, leading the RBA to step up the rhetoric.   By the policy meeting earlier this month the Aussie had been supported above 92 US cents for over two months and was looking strong.   In the minutes of that meeting, the RBA again pointed accusingly to the exchange rate, which was "high by historical standards, particularly given the further decline in commodity prices over the past month".   And it repeated the warning that the exchange rate's recovery from its February lows mean less of a boost to growth.

AUD/USD June 26 at 01:40 GMT   0.9410   H: 0.9414   L: 0.9398

AUD/USD Technical

During the early hours of the Asian trading session on Thursday, the AUD/USD is trying to rally higher after falling sharply a couple of days ago from near the resistance level at 0.9425. 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 well above 0.90 again. Current range: trading right around 0.9410.

Further levels in both directions:

• Below: 0.9220 and 0.9100.

• Above: 0.9425.

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 jumped back above the 50% level as the Australian dollar has fallen away from the two month highs near 0.9425. The trader sentiment changes to in favour of long positions.

Economic Releases

• 12:30 US Core PCE Price Index (May)
• 12:30 US Initial Claims (21/06/2014)
• 12:30 US Personal income (May)
• 12:30 US Personal spending (May)
• EU European Council Meeting (to 27th)
• UK Financial Stability Report Published

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