AUD/USD: Bounces Off Support At 0.89

AUD/USD for Tuesday, March 4, 2014

Throughout the last few weeks the Australian dollar has done very little other than continue to trade around the 0.90 level, although over the last week it has crept a little lower.   Over the course of the last week including at the start of this week, it has fallen down sharply below this level to a support level around 0.8900 where it is presently trading and trying to rally off.  Earlier last month the Australian dollar enjoyed a strong move higher moving through the previous resistance level at 0.88 and reaching a three week high around 0.8980. For a couple of weeks the Australian dollar continued to make runs at the resistance level of 0.88 only to be rejected again and again and forced lower. During this time the Australian dollar seemed content to remain steady and consolidate just below the key 0.88 level, after its strong fall through most of January. For the last few months the Australian dollar has 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 has since 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.

After all of its steady good work in the middle of November which saw the AUD/USD steadily move higher from support at 0.93 back up to a one week high near 0.9450, the AUD/USD has since returned all of those gains and then some more. Throughout most of October the AUD/USD enjoyed a solid and steady move higher from the support level at 0.93 up to the resistance level at 0.95 and beyond to a high around 0.9760. It has been all down hill since then. Throughout the first half of September the AUD/USD enjoyed a solid run which was punctuated by a strong surge higher sending it to a then three month high just above 0.95. A couple of months ago the AUD/USD had been trying valiantly to stay above the support level at 0.89 as all week it placed downward pressure but was unable to sustain any break lower.

Inflation is rising towards the top of the Reserve Bank of Australia's target range, putting pressure on the central bank to raise interest rates, according to a survey of price movements.   The TD Securities-Melbourne Institute Monthly Inflation Gauge shows prices rose 0.2 per cent in February and were 2.7 per cent higher than a year ago, putting inflation towards the top of the RBA's target two to three per cent range.   TD Securities Head of Asia Pacific Research Annette Beacher says the figures show inflation is speeding up.   "Using mid-quarter prices now available, our inflation gauge measure is showing worrying signs of further price acceleration," he said.   "The clear signal is that inflation pressures continue to build rapidly, pressing against, if not punching through, the upper bound of the RBA two to three per cent target range."   Ms Beacher said a rising inflation rate would put pressure on the RBA to lift the cash rate, currently at 2.5 per cent, by the end of the year.

AUD/USD Daily chart" title="AUD/USD Daily chart" height="232" width="474">

AUD/USD 4 hourly chart" title="AUD/USD 4 hourly chart" height="233" width="474">

AUD/USD March 3 at 21:55 GMT   0.8938   H: 0.8946   L: 0.8903

AUD/USD Technical

S3	S2	S1	R1	R2	R3
0.8900	---	---	0.9050	0.9080	0.9180

During the early hours of the Asian trading session on Tuesday, the AUD/USD is trying to rally higher after recently bouncing off support around 0.89.  The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents. Current range: trading just above 0.8900 around 0.8940.

Further levels in both directions:

• Below: 0.8900.

• Above: 0.9050, 0.9080 and 0.9180.

OANDA’s Open Position Ratios

AUD/USD Open Position Ratios" title="AUD/USD Open Position Ratios" height="28" width="474">

(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 60% as the Australian dollar has dropped back below 0.90. The trader sentiment remains in favour of long positions.

Economic Releases

• 00:30 AU Building approvals (Jan)
• 00:30 AU Current Account (Q4)
• 00:30 AU Net Exports of GDP (Q4)
• 03:30 AU RBA - Overnight Rate (Mar)
• 09:30 UK CIPS/Markit Construction PMI (Feb)
• 10:00 EU PPI (Jan)
• 15:00 US IBD Consumer Optimism (Mar)

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