AUD / USD – Recovering Well from Support at 1.04

AUD/USD for Tuesday, February 5, 2013

In the last few days, the Australian dollar has rallied well to push back above the key 1.04 level, after quite a volatile period.   For the few days before, the Australian dollar surged back towards 1.0480 before falling just as heavily a 24 hour period back to the 1.04 level.   Generally over the last few weeks, the AUD / USD has slowly drifted away from the key resistance level at 1.06.   Over the last month or so as expected, the 1.06 level has provided stiff resistance, having previously done so last year on numerous occasions.   A few weeks ago it moved back to the key level of 1.05 where it met with strong demand resulting in solid support. The 1.05 level has emerged as one of significance over the last couple of months however after a little push back towards 1.06, the AUD/USD has since fallen sharply back down below 1.04.   Are we going to see another rally back towards 1.06?  There is likely to be further resistance around the 1.0480 to 1.05 level which will have to be dealt with first.

Over the last few months, 1.03, 1.0350 and now the 1.04 level has stepped in and provide strong support after equally strong falls. Throughout October and November last year, the AUD / USD bounced back off the support level at 1.02 and slowly but surely regained lost ground meeting and dealing with key levels along the way. This resulted in the AUD / USD moving to a three month high just shy of 1.06 in the middle of December. After falling sharply in a couple of weeks in late December which saw it drop down below 1.0350, the AUD / USD regained the lost ground quickly and again returned to the 1.06 level touching a four month high. Should the AUD/USD recover from here, it is likely to continue to place pressure on the 1.06 level as the major lows are increasing demonstrating very strong long term support.

In Australia, Building Approvals slumped badly, while ANZ Job Advertisements posted yet another decline. In the US last week ended on a mixed note. Employment numbers were a disappointment, as Non-Farm Payrolls did not meet the estimate and the unemployment rate moved higher.   However, consumer sentiment and manufacturing data looked sharp. The new trading week started with a whimper, as the markets were treated to some weak Australian releases.

(Daily chart / 4 hourly chart below)

AUDUSD Technical Analysis Daily Chart.
 

AUDUSD Technical Analysis Candlestick 4 Hour Chart.
AUD/USD February 4 at 23:45 GMT 1.0443    H: 1.0443    L: 1.0412

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0400 1.0350 1.0300 1.0500 1.0600

 

During the early hours of the Asian trading session on Tuesday, the AUD / USD has been placing pressure on the short term resistance level at 1.0440 and has just started to push through.   The 1.04 level has been a key level for the AUD / USD late last year and emerged again as one of support in the last few days.   After its heavy fall, it has replied upon it again within the last week.    Current range: Trading just above 1.0440.

Further levels in both directions:

• Below: 1.0400, 1.0350, and 1.0300.

• Above: 1.0500 and 1.0600.

 

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for the EUR/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The AUD/USD ratio has remained quite steady over the last 48 hours.   Trader sentiment continues to be biased a little in favour of long positions.

Economic Releases

  • 00:30 AU Trade Balance (Dec)
  • 03:30 AU RBA – Overnight Rate (Feb)
  • 08:58 EU Services & Composite PMI (Jan)
  • 09:28 UK CIPS / Markit Services PMI (Jan)
  • 10:00 EU Retail Trade (Dec)
  • 15:00 US ISM Non-Manufacturing (Jan)

 

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Stuart McPhee

Stuart McPhee

Senior Currency Technical Analyst at Market Pulse
Stuart McPhee has nearly 20 years’ experience as a private trader and he specializes in technical market analysis of major currency pairs. He is the author of several bestselling trading books, most recently the fourth edition of his popular book “Trading in a Nutshell” (John Wiley), and he contributes articles to daily newsletters and blogs. He produces articles and videos on the how-tos of technical trading. Living in Melbourne, Australia, Stuart speaks at conferences and events worldwide.
Stuart McPhee