After establishing and trading within a range between two key levels at 0.9550 and 0.97 over the last couple of weeks, the AUD/USD has recently broken out and surged higher to a new two week high almost within reach of 0.9800. The trading established a trading range as it has been able to halt the strong decline it experienced through May. A few weeks ago the 0.97 level provided some support and in recent weeks has provided stiff resistance to any rally efforts, which is why it is significant that the AUD/USD has now broken through that level. It had attempted on a few occasions to rally however the Australian dollar had run into a brick wall of resistance at this level. A couple of weeks ago the AUD/USD enjoyed a relatively solid few days which saw it halt the falls and rally back up towards 0.9850 before a sharp which saw it drop two cents. The week prior it experienced its worst week in a long time which saw it continue to move to new lows near 0.98, from highs not so long ago above 1.0250, although it did settle a little and find some support at the long term support level at 97 cents.
Although presently appearing unlikely in the short term, should it recover and move back, it is likely the 1.00 level may now provide some resistance to higher prices. The AUD/USD has now experienced an ordinary last few weeks as it wasn’t so long ago it was moving up above 1.03 and threatening the key level at 1.0360, and before that it was approaching 1.06. Up until earlier in May, the 1.02 level was one of significance and presented as a long term support level however this has now clearly been broken. It had been showing some bearish as it continued to place selling pressure on the 1.0220 and 1.02 levels and the RBA rate cut a few weeks ago was the catalyst for a strong push lower, seeing it just fall very heavily as if all support gave way.
The last couple of months have seen the AUD/USD establish a strong medium term down trend with lower peaks and lower troughs, as it has moved from near 1.06 down to near 0.95 in that time. In doing so, it has completely ignored any likely support at either 1.04 or 1.0360, and more recently the long term support level at 0.97. Up until mid April, the Australian dollar was enjoying its best move higher since October and November last year. Up until a month ago, the AUD/USD spent the best part of a month trading between the two key levels of 1.0220 and 1.0360 and it will take some effort to return it to this range, with the resistance being offered at the 1.02 level and now likely at 1 too.
The markets will be keeping a close watch as the RBA sets its key interest rate on Tuesday. Most analysts are predicting no change to the current rate of 2.75%, but the RBA has a habit of surprising the markets with unexpected rate reductions. The Australian dollar got some help over the weekend from its biggest trading partner, as Chinese Manufacturing PMI remained above the 50-point line, posting a reading of 50.8 points. This surpassed the estimate of 49.9 points. An increase in Chinese production means a demand for raw materials from Australia, which is good news for the Australian economy. However, Australian data did not look as sharp on Monday. Retail Sales, a key release, bounced back from a decline and gained 0.2% in May, but this was below the forecast of 0.3%. ANZ Job Advertisements posted another decline, as the employment indicator dropped 2.4%. The indicator has recorded only one gain this year, underscoring weakness in the Australian employment sector. There was good news from Company Operating Profits, which rose 3.0%, well above the estimate of 1.6%.
AUD/USD June 4 at 01:25 GMT 0.9754 H: 0.9791 L: 0.9617
During the early hours of the Asian trading session on Tuesday, the AUD/USD is just easing away a little from the short term resistance level at 0.9800 after it has recently surged higher from below 0.9700. A month ago the AUD/USD was spending a fair amount of time trading roughly between 1.02 and 1.0550, however that range seems a distant memory as it has fallen down to near a 12 month low below 0.95500 last week. In moving through to 1.0580 only a month ago, it moved to its highest level since January. Current range: trading right around 0.9750.
Further levels in both directions:
• Below: 0.9550.
• Above: 0.9800, 0.9850 and 1.0000.
(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 eased away from 75% a little as the Australian dollar has surged back up through 97 cents. The trader sentiment remains strongly in favour of long positions.
Economic Releases
- 01:30 AU Current Account (Q1)
- 01:30 AU Net Exports of GDP (Q1)
- 04:30 AU RBA – Overnight Rate (Jun)
- 08:30 UK CIPS/Markit Construction PMI (May)
- 09:00 EU PPI (Apr)
- 12:30 CA Merchandise Trade (Apr)
- 12:30 US Trade Balance (Apr)