The AUD/USD has not enjoyed a great last few days as it has dropped sharply from around 1.0250 down to below parity and an 11 month low near 0.9950. At the end of last week, it experienced its largest 24 hour drop in a long time falling strongly down through 1.02 and 1.01. It is presently trying to claw back some lost ground and move back to above 1.00. It had an ordinary week last week as it wasn’t so long ago it was moving up above 1.03. Up until recently, 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 signs over the last few weeks as it continued to place selling pressure on the 1.0220 and 1.02 levels and the RBA rate cut earlier last week was the catalyst for a strong push lower.
The last couple of weeks have seen the AUD/USD establish a medium term down trend with lower peaks and lower troughs, as it has moved from near 1.04 down to below 1 in that time. In the previous few weeks, the AUD/USD spent most of its time trafing between 1.02 and 1.0360. During that time, it moved up to a two week high and back towards 1.04 however it has quickly handed back all of those gains and then some. A couple of times in that same period it received solid support around 1.0220, just above the key long term level at 1.02. All of this just gave way last week as the AUD/USD was heavily sold down, and now the 1.02 level is poised to provide resistance and thwart attempts to push higher.
Over the course of the last month, the Australian dollar has fallen very sharply from near 1.06 to its lows near 1.0050, and in doing so, it also completely ignored any likely support at either 1.04 or 1.0360. In contrast, the week prior, it enjoyed a solid week moving strongly off the key level of 1.0360 towards 1.06 and to its highest levels since January. Up until mid April, the Australian dollar was enjoying its best move higher since October and November last year. Up until earlier this week, 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. A couple of months ago, it did well to push back up off the support level at 1.02 and start the move that it was enjoying getting close to 1.06.
The RBA Quarterly Report failed to inspire any fresh declines, despite RBA slashing its inflation forecast from 2.5% to 2.25% in 2013, one notch higher than the target’s baseline. It seems that market is interpreting this as the reason why RBA cut rates last Tuesday, rather than using it as an indication that RBA will cut rates further within 2013. Credit Suisse’s Overnight Index Swaps are pricing in a mere 18% chance of a 25bps cut in the next meeting post RBA report, agreeing with what we are seeing in terms of the mute price action.
AUD/USD May 13 at 01:20 GMT 0.9996 H: 1.0024 L: 0.9976
AUD/USD Technical
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During the early hours of the Asian trading session on Monday, the AUD/USD is trying to claw back some lost ground and move back to above 1, after it fell strongly moving down through that level to finish last week. Up until a few weeks ago, the AUD/USD was spending a fair amount of time within a trading range roughly between the key levels of 1.04 and 1.05, however that range seems a distant memory as it has fallen down to a 11 month low. In moving through to 1.0580 only a few weeks ago, it moved to its highest level since January. Current range: trading right around 1.
Further levels in both directions:
• Below: 0.9950.
• Above: 1.0000, 1.0360 and 1.0550.
(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 remains above 70% which is it highest level in a long time, as the Australian dollar has moved back down below parity. The trader sentiment remains strongly in favour of long positions.
Economic Releases
- 01:30 AU Housing & Lending Finance (Mar)
- 01:30 AU NAB Business Conditions & Confidence (Apr)
- 12:30 US Retail Sales (Apr)
- 14:00 US Business inventories (Mar)
- 15:00 EU Eurogroup Meeting