Technicals | Sep 11 2014
Bottom Line 10/09/14
10/9:
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Up
Support Levels: 92.00 / 90.80 / 88.90
Resistance Levels: 95.00 / 97.50
Technical Discussion
We looked at in more detail last night in our U.S Dollar review about the bullish and bearish variations across the worlds currency majors at the moment. Interesting reading if you are looking for a recap. Point in question though was Australia's RBA reluctance to reduce rates due to an overheated property market. Yet lowering interest rates further, which will in turn weaken our currency, is a likely catalyst to finally start moving our own markets forward. The AUDUSD tagged a 6 month low last night breaking our minor support line at 92.00. The sell off has been attributed to expectation that the U.S are close to raising their own interest rates off record lows. Yet the recent weakness in the Aussie has been strong with our view being that an unexpected drop in our own interest rates is now being speculated on by the smart money. Very interesting times right here.
Reasons for immediate weakness (longer term optimism remains):
→ Inflation remains in check in Australia and unemployment an issue
→ Interest rates for the most part globally are at record lows yet are unlikely to remain that way. U.S has now flagged the potential for hikes.
→ unexpected interest rate cut on the horizon for Australia ?
→ longer term bullish outlook damaged below 89.80
We now look for confirmation of this breakdown via a move below 91.90. The typical 50.0% – 61.8% retracement zone of the move off the January 2014 lows targets 90.80 and 89.80 respectively. Some of the overall structures are still bullish here from a bigger picture perspective yet these will start breaking down via a convicted move below 89.80. The larger 5-wave price move off the 2008 lows has its own 50.0% – 61.8% retracement zones projecting 85.00 and 79.00 respectively. We have mentioned these numbers in past reviews yet they will now be back in play if price continues to push on south in a convicted manner from here. There is a major longer term support line in between these two targets as well. So even though they represent a serious pull back from here, buyers are expected to return strongly if the region ends up being tagged over the coming months. For now though our longer term bullish rhetoric remains in place above 89.80, yet we are very open to the structures potentially breaking down as well. Never stubbornly stick to a view if price action starts to refute !
Trading Strategy
We have a valid reason to sell down the AUD right here so the recommendation is to sell below 91.90 with stops above 92.90. We are going to keep it very low risk with the 200 day moving to contend with as well as the immediate 50.0% – 61.8% retracement zone. The potential higher degree pull back targets though as mentioned above, certainly have substantial profit targets attached to them if achieved. It could go either way on this one so a recommendation for experienced traders only.
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