Marshall Gittler
Trading Analysis
AUD/USD
The dollar traded higher against all of its G10 counterparts during the European morning Thursday.
The euro neared to low levels last seen in November 2012 against the dollar, as the ECB President Mario Draghi spoke at a conference hosted by the central bank of Lithuania less than 100 days until the country adopts the euro. However, the first move started after comments from President Draghi made to the Lithuanian business newspaper, showed that the ECB stands ready to use additional unconventional instruments within its mandate, and alter the size or composition of these unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation. EUR/USD dropped during the European morning but found some buy orders just below the 1.2700 line. The latest batch of data highlights the diverging economic outlook between Europe and the US, and supports our view that the single currency could weaken further perhaps towards the 1.2660 barrier.
The Australian dollar plunged to a new seven-month low as the currency came under renewed selling pressure, mainly driven by the Kiwi’s tumble. Even though the Reserve Bank of Australia Governor Glenn Stevens made no attempt to talk down the Aussie, his concerns about the nations overheating property market heightened the need for further steps to tighten bank lending standards and complement the Bank’s stance that the most prudent course is likely to be a period of stability in interest rates.
AUD/USD tumbled during the European morning Thursday, breaking below the support barrier (turned into resistance) of 0.8835. That move confirms a forthcoming lower trough and I would expect the bears to pull the trigger for extensions towards our next support area of 0.8730 (S1), defined by the low of the 4th of February. As long as the price structure remains lower lows and lower highs below both the 50- and the 200-period exponential moving averages, I see a negative overall picture. My only concern is that I still see positive divergence between the price action and both of our momentum indicators, something that designates decelerating downside momentum.
Support: 0.8730 (S1), 0.8660 (S2), 0.8600 (S3).
Resistance: 0.8835 (R1), 0.8920 (R2), 0.9000 (R3).
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