Over the last couple of weeks, the AUD/USD has established a trading range between two key levels at 0.9550 and 0.97 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. It has attempted on a few occasions to rally however the Australian dollar has run into a brick wall of resistance at this level. During its time in the trading range, it hasn’t moved a lot as it has consolidated a little. 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 Australian dollar suffered a horrendous month of May, with spectacular declines against thee US dollar, plunging more than seven cents against the US dollar. The greenback has taken advantage of the RBA interest rate cut, lukewarm Australian data and the government’s budget which pointed to the high value of the Australian dollar as an impediment to economic growth. These factors have resulted in nervous investors shifting their funds to US assets, resulting in the Aussie plunging in value. We saw this on Friday as well, as weak US releases resulted in sharp losses for AUD/USD.
AUD/USD June 3 at 00:15 GMT 0.9606 H: 0.9623 L: 0.9571
During the early hours of the Asian trading session on Monday, the AUD/USD is trying to stay above 0.9600 after it has recently surged higher. 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 0.9600.
Further levels in both directions:
• Below: 0.9550.
• Above: 0.9700, 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 moved back above 75% again as the Australian dollar has drifted back down below 96 cents. The trader sentiment remains strongly in favour of long positions.
Economic Releases
- 01:30 AU Inventories (Q1)
- 01:30 AU Retail trade (Apr)
- 05:00 JP Vehicle Sales (May)
- 07:00 UK Halifax House Price Index (3rd-7th) (May)
- 07:58 EU Manufacturing PMI (May)
- 08:28 UK CIPS/Markit Manufacturing PMI (May)
- 12:58 US Manufacturing PMI (May)
- 14:00 US Construction Spending (Apr)
- 14:00 US ISM Manufacturing (May)
- 21:00 US Vehicle Sales (May)