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AUDUSD - Enjoys Solid Support from 0.6850 as Economy Struggles



AUDUSD - Enjoys Solid Support from 0.6850 as Economy Struggles
In the last week or so the AUDUSD has fallen sharply from a six month high above 0.70 back down to the current key level of 0.6850, where it has enjoyed some solid support from in the last four days. Two weeks ago it surged higher off support at 0.6850 to the high after having moved through previous resistance at 0.6850 last month, which had put selling pressure on prices. Should the support at 0.6850 fail, then this level will likely offer resistance again to any rallies.

Prior to breaking up through 0.6850, the AUDUSD had bounced strongly off the key support level at 0.6750 after spending around five weeks steadily but surely easing away from a three month high above 0.69 and moving back down below the key 0.6850 level throughout November. In doing so it returned to its popular range between 0.6750 and 0.6850, and it wouldn’t surprise many if it was to return there again.

The 0.6850 level has provided some stiff resistance over the last two months so it is quite significant that it has now broken back through this level, as it is likely to play a role again. Leading up to the three month high in November, the AUDUSD had been slowly moving higher achieving higher peaks and troughs to rally off its ten year low around 0.6670 reached in early October. Even though the AUDUSD has been well supported by 0.6750, it has fallen through this level on three occasions in the last few months. For the last six months, the AUDUSD has seemed content to generally trade within the range between 0.67 and 0.70, and is not showing any signs of breaking out of this range any time soon.

At the last policy meeting for 2019, the Reserve Bank of Australia (RBA) kept the official cash rate on hold at a historic low of 0.75%.  However, the RBA is now torn between stimulating growth and rising house prices, having just posted five consecutive month of gains.  So, while the three rate cuts since June have failed to help the unemployment rate, which has moved up to 5.3%, it has boosted house prices again.  Dr Lowe said in a post meeting statement, "There are further signs of a turnaround in established housing markets. This is especially so in Sydney and Melbourne, but prices in some other markets have also increased recently.  In contrast, new dwelling activity is still declining and growth in housing credit remains low.”  There remains concerns about the Australian economy with more retail stores seemingly going into liquidation every day, which is indicative of the weaker consumer sentiment.  In the last month or so, concerns are growing about the possible economic impact of the bushfires.  The RBA's board next meets on 4th February.

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