AUD/USD – Drops Sharply to Six Month Low Below 0.8940

The Australian dollar has seen its sharpest fall in over 12 months as it fallen down to a six month low below 0.8950 even though it temporarily found some support at 0.90.  The long term key level at 0.90 was called upon to desperately provide some much needed support to the Australian dollar, which it has done in the last few days. It showed some positive signs to finish out a couple of weeks ago as it surged higher again bouncing off support below 0.93 and reaching a new four week high around 0.94 before falling sharply again. A few weeks ago it enjoyed a solid week moving up from below 0.9300 to a then three week high around 0.9370 before easing a little lower to finish the week. The Australian dollar reached a three week high just shy of 0.9480 at the end of July after it enjoyed a solid period which saw it surge higher through the resistance level at 0.9425 to the three week around 0.9480, before easing back towards that level.

The Australian dollar enjoyed a solid surge higher reaching a new eight month high above 0.95 at the end of June, only to return most of its gains in very quick time to finish out that week. Since the middle of June the Australian dollar has made repeated attempts to break through the resistance level around 0.9425, however despite its best efforts it was rejected every time as the key level continued to stand tall, even though it has allowed the small excursion to above 0.95. After the Australian dollar had enjoyed a solid surge in the first couple of weeks of June which returned it to the resistance level around 0.9425, it then fell sharply away from this level back to a one week low around 0.9330 before rallying higher yet again. Its recent surge higher to the resistance level around 0.9425 was after spending a couple of weeks at the end of May trading near and finding support at 0.9220. The 0.9220 level has repeatedly reinforced its significance as it is again likely to support price should the Australia dollar retreat further.

Throughout April and into May the Australian dollar drifted lower from resistance just below 0.95 after reaching a six month high in that area and down to the recent key level at 0.93 before falling lower. During this similar period the 0.93 level has become very significant as it has provided stiff resistance for some time. The Australian dollar appeared to be well settled around 0.93 which has illustrated the strong resurgence it has experienced throughout this year. For the best part of February and March the Australian dollar did very little other than continue to trade around the 0.90 level, although at the beginning of March it crept a little lower down to a three week low below 0.89. Towards the end of March however, the Australian dollar surged higher strongly moving to the resistance level at 0.93 before consolidating for a week or so.

Australia's economy is expected to pick up pace in early 2015 as consumers become more confident and start spending again.  The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, fell by 0.15 points in August.  That would indicate that economic growth will stay at a below average pace for the rest of the year, but Westpac chief economist Bill Evans is more optimistic about the new year.  He expects consumer spending in the second half of 2014 to improve and rise further in the new year.  "That more positive consumer outlook is expected to strengthen further in the first half of 2015, reaching a 3.5 per cent annualised pace," Mr Evan said.  "That is consistent with our slightly more upbeat view on the first half of 2015 than is implied by the index."  Westpac's forecast for annualised economic growth for the first half of 2015 is 3.25 per cent, which is more optimistic than the Reserve Bank's most recent forecast of two to three per cent.  "Over the last six months the index's growth rate has remained at a below trend growth pace," Mr Evans said.  "However, the components of the index which have been driving this below trend pace have evolved."

(Daily chart / 4 hourly chart below)

AUD/USD September 18 at 02:40 GMT   0.8963   H: 0.8967   L: 0.8938

AUD/USD Technical

During the early hours of the Asian trading session on Thursday, the AUD/USD is trying to rally a little higher after finding some support around 0.8950, after falling heavily over the last week or so.   The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents and it has done very well to recover slightly to near 0.95 again. Current range: trading right around 0.8950.

Further levels in both directions:

• Below: 0.8950.
• Above: 0.9425 and 0.9500.