AUD/USD maintains relative weakness despite US dollar plunge
James Chen December 10, 2015 1:47 AM
<p>While the US dollar’s plunge on Wednesday saw the greenback fall precipitously against most other major currencies, AUD/USD remained relatively unmoved as the Australian dollar […]</p>
While the US dollar’s plunge on Wednesday saw the greenback fall precipitously against most other major currencies, AUD/USD remained relatively unmoved as the Australian dollar also remained weak on a continuing slump in commodity prices.
Thus far, this week has seen a sharp pullback for AUD/USD that broke the prior short-term uptrend, which had been in place since early November. That uptrend was a part of a generally bullish channel that originated from September’s six-year low around 0.6900. Despite this bullish channel, however, the currency pair continues to trade within a strong, long-term downtrend with major resistance around the key 200-day moving average.
Before this week’s tumble, AUD/USD had been rising up to approach this 200-day moving average as the Reserve Bank of Australia (RBA) recently opted to keep interest rates on hold (instead of cutting rates) in light of the fact that Australian exports and economic conditions have improved in the past several months. This provided a boost for the Australian dollar, albeit short-lived.
With weakness in commodities persisting, the Australian dollar continues to be pressured. Combine this with expected support for the US dollar ahead of next week’s Fed decision, which is broadly anticipated to result in the first US interest rate hike in nearly a decade, the longer-term directional bias for AUD/USD remains to the downside.
Upcoming on Thursday morning in Australia is the Australian Employment Change and Unemployment Rate data for November. These data points could result in increased volatility for AUD/USD.
Having just reached back down to the key 0.7200 support level as well as the 50-day moving average, the currency pair is at a critical juncture. Any sustained follow-through below the 0.7200 level could lead to a return towards the 0.7000 psychological support level, with a further downside target around the noted 0.6900-area multi-year low. To the upside, a bounce from the current levels should continue to be limited to the upside by 0.7385 resistance as well as the noted 200-day moving average.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.