The last week has seen the AUD/USD fall very strongly and appear to resume the medium term down trend as it moves to a new three year low near 0.8850. It was only a few weeks ago the AUD/USD moved up towards the 0.93 level again as it continued to place buying pressure on that level. It was during this time it did very well to maintain its price level well above 0.92 as place upward buying pressure on the resistance level at 0.93 however a couple of weeks ago, it fell sharply to back under 0.92 and started to place pressure on the short term support level of 0.9150. After finding solid support at 0.90 a few weeks ago, it did well to rally moving up above 0.92 for the first time in nearly a week and getting to within a whisker of 0.93 again.
Over the course of the last month the 0.93 level has provided reasonable resistance to any movement higher and this level will likely play a role again should the AUD/USD rally up from below 0.90. To finish a few weeks ago, it dropped sharply again to resume its medium term down trend as it moved down towards the key long term level of 90 cents, however it then surged higher to within a whisker of the 93 cents level before falling away to close out the week. The 0.9150 level had become a key level over the short term providing both some resistance and more recently support, and this was called upon again a couple of weeks ago providing some much needed support however it was completely ignored last week as the AUD/USD fell heavily through it. It was only a month or so ago that many were waiting for the AUD/USD to break below the 90 cents level and then it would have been a matter of how far can it drop. It had continued to drift lower and move towards the 90 cents level, a level not seen for three years. Considering the speed of its decline over the last few months, the last month or so had seen a significant slowing down and almost some consolidation as it has rested well on the support at 0.90 and made its way back to 0.93 on a few occasions.
The last few 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 0.90 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. After making a solid run higher in the middle of June back towards the key level of 0.97, the AUD/USD has since continued its strong and steady decline moving to below 0.90 and levels not seen since near the middle of 2010. This has seen it experience a significant strong trend that would have caught many people on the wrong side of.
The Australian Producer Price Index (PPI) dropped from 0.3% to 0.1%, its worst showing since April. The markets had anticipated a solid gain of 0.5%. Earlier last week, Commodity Prices and Import Prices both posted poor readings. Weakness in both import and export prices are certainly an unwelcome mix, and points to weakness in demand for imports and trouble in the Australian export sector. Earlier last week, RBA Governor Glenn Stevens was in the news, stating that there was further room for an interest rate reduction next week. Stevens complained about low business confidence, the end of the mining boom and even criticized the government for not providing a specific date for the election. This is not the first time that Stevens has made comments which have impacted on the currency markets, and his comments about a possible rate reduction resulted in more pressure on the struggling Australian dollar. Analysts are saying there is a strong likelihood that the RBA will take action and lower rates, probably to 2.50%.
AUD/USD August 5 at 04:10 GMT 0.8867 H: 0.8868 L: 0.8865
During the early hours of the Asian trading session on Monday, the AUD/USD is falling even further after breaking any sort of support at the 0.89 level. Despite its slowing down the last few weeks, the Australian dollar has been in the middle of a free-fall, as the currency has lost around 15 cents since the beginning of May. In moving through to 1.0580 only a few months ago, it moved to its highest level since January. Current range: trading just below 0.8860.
Further levels in both directions:
• Below: 0.8850
• Above: 0.9300
(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 70% as the Australian dollar has fallen heavily below 90 cents. The trader sentiment remains in favour of long positions.
Economic Releases
- 01:30 AU Retail trade (Jun)
- 07:58 EU Composite PMI (Jul)
- 07:58 EU Services PMI (Jul)
- 08:28 UK CIPS/Markit Services PMI (Jul)
- 08:30 EU Sentix Indicator (Aug)
- 09:00 EU Retail Trade (Jun)
- 14:00 US ISM Non-Manufacturing (Jul)