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AUDUSD - Eases from Near 0.76 as Australia Out of Recession



AUDUSD - Eases from Near 0.76 as Australia Out of Recession
In the last few days the AUDUSD has eased off a little and taken a breather after such a strong surge higher in the last few weeks moving to a two year high near 0.7580. For around two weeks prior to the move higher, the AUDUSD rested on and enjoyed solid support from the key 0.7250 level having surged higher in the week prior through the key level. Prior to the surge it had fallen sharply back down through support at the key 0.7050 level down to a three month low below 0.70, before rallying strongly. Although some distance away now, should the AUDUSD decline from its current highs, the 0.7250 level would be expected to step up and provide some support again. Having resisted prices so strongly, it was no surprise that the 0.7250 level stepped in and offered support once it was broken through so strongly in early November.

Up until its break several weeks ago, the AUDUSD spent most of its time trading between two key levels, meeting resistance at 0.7250 and being supported at 0.7050, after having fallen sharply through the 0.7250 level down to a then two month low below the key 0.7050 level in late September. It did well to rally quickly to back above the 0.7050 level which had supported the AUDUSD, although the 0.70 level has helped out a little too.

Before dropping into its recent range between 0.7050 and 0.7250, the AUDUSD spent around two weeks resting on support at 0.7250 after easing away from a two year high above 0.74, which is why the 0.7250 has offered resistance and support since. In the week leading up to the two year high the AUDUSD was able to push through the resistance at 0.7250, which had been placing downward pressure on the currency pair. The 0.7050 level has also played a key role in the last few months first providing resistance to the AUDUSD and more recently supporting price.

For the month or so before the break through the 0.7050 level in July, the AUDUSD had seemed content to remain within a range between another key level of 0.6850 and the resistance at 0.7050. Leading in to that range, the AUDUSD had spent several weeks pushing higher to reach 0.7050 however it ran into a wall of resistance, as it had previously offered stiff resistance to the AUDUSD last year, reinforcing how significant that level is. The 0.6750 and 0.6850 levels are also a chance to support the AUDUSD should they be called upon.

Earlier this month the Reserve Bank of Australia (RBA) left the official cash rate at a historic low of 0.1%. The RBA governor Philip Lowe told a parliamentary committee that Australia is official out of its brief recession as recent data showed that Australia’s GDP grew by 3.3% in the September quarter, and it is also expected to be “solidly positive” in the December quarter.  The GDP shrank 7% in the June quarter, which was the nation’s worst contraction on record, after falling 0.3% in the March quarter, therefore meeting the definition of a recession.  Governor Lowe cautioned that while Australia is technically no longer in recession, the nation should be preparing for a bumpy ride.  “And then, next year, our central scenario is for the economy to grow by 5 per cent and then 4 per cent over 2022,” Dr Lowe told the House of Representatives Standing Committee on Economics on Wednesday.  “These figures, though, cannot hide the reality that the recovery will be uneven and bumpy and that it will be drawn out.  Some parts of the economy are doing quite well, but others are in considerable difficulty,” he added.  “And even with the overall economy now growing solidly, it will not be until the end of 2021 that we again reach the level of output recorded at the end of 2019.”

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This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.