AUD/USD – Support at 0.77 Holding Firm

To start this new week the Australian dollar fell sharply but landed on the previous key level at 0.77 which has offered considerable support since that time.  The Australian dollar enjoyed a solid week last week moving off support around 0.76 to reach a three week high just shy of the resistance level at 0.7850. In doing so, it moved through the key resistance level at 0.77. After placing great pressure on the resistance level at 0.77 a couple of weeks ago, the Australian dollar fell heavily earlier last week before surging higher again to finish out the week. Over the best part of the last few weeks, the Australian dollar has relied heavily on support at the 0.76 level after falling away sharply to down below the key 0.77 level over the course of the week prior, and it is relying on this level again presently. Throughout the last couple of weeks it felt significant resistance from the key 0.77 level which has been severely tested during this period and it will be interesting to see whether this level now acts as some support.

Its next obvious support level is down at 0.7550 and it will hoping to be propped up by it. For a couple of weeks it moved back and forth from below 0.76 and up to the key resistance level at 0.7850 and higher, before the recent fall. Back in early March the Australian dollar made a statement and broke down strongly through the key 0.77 level which then provided significant resistance for the following few days. It was also able to enjoy some short term support around 0.7550 which propped it up and allowed it to rally strongly back up to above 0.79. Throughout February the Australian dollar made repeated attempts to move up strongly to the resistance level at 0.7850 however it was rejected every time and sent back easing lower, which is why this level remains significant presently. Just prior to that towards the end of February the Australian dollar moved through the resistance at 0.7850 to reach a new four week high around 0.7900. In the second half of January, the Australian dollar fell very sharply and break lower from the trading range that had been established roughly between 0.8050 and 0.8200.

Back in mid-January it made numerous attempts at the resistance level at 0.82 only to be sent back often before finally finishing that week moving through this key level. In doing so it was able to reach a one month high near 0.83 before being sold back down again towards 0.82 as the resistance and selling activity above this level kicked in. Over the Christmas / New Year period, the Australian dollar seemed to have been content with trading in a narrow range below the resistance at 0.82, which continues to remain a key level as it is presently provides resistance. The Australian dollar experienced a disappointing November and December moving from resistance around 0.88 down to the new lows recently. For a couple of months from September through to November, the Australian dollar did well to stop the bleeding and trade within a range between 0.8650 and 0.88 after experiencing a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650.

Australia’s central bank is willing to cut interest rates again if needed, but is cautious about the likely impact on house prices and debt levels, a top policy maker said on Monday.  Speaking in New York, Reserve Bank of Australia (RBA) Governor Glenn Stevens also reiterated that the Australian dollar was “very likely” to fall further over time.  The central bank cut interest rates to a record low of 2.25 percent in February, but it surprised many analysts by skipping further moves at its policy meetings in March and April.  “The (RBA) Board has clearly signalled a willingness to lower it even further, should that be helpful in securing sustainable economic growth,” Stevens told the American Australian Association.  “The Board has been proceeding with a degree of caution that is appropriate in the circumstances,” he added, “It also has, I would say, a realistic assessment of how much monetary policy can be expected to achieve in supporting the adjustment the economy needs to make.”  Financial markets imply around a 50-50 chance of a cut to 2 percent at the RBA’s next meeting on May 5, having lengthened the odds after a surprisingly strong jobs report out last week.

(Daily chart / 4 hourly chart below)

AUD/USD April 22 at 02:10 GMT   0.7724   H: 0.7726   L: 0.7706

AUD/USD Technical

During the early hours of the Asian trading session on Wednesday, the AUD/USD is bouncing off support at the key 0.77 level after easing back from the resistance level at 0.7850. Current range: trading right above 0.7700.

Further levels in both directions:

• Below: 0.7700, 0.7600 and 0.7550.
• Above: 0.7850 and 0.8200.