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The Australian dollar  showed impressive strength against its US counterpart,  breaking parity and breaching the 1.02  level, before  settling down to close the week at  the 1.04 level. The upcoming holiday week  is  very quiet, with only one indicator release. Here is an outlook for the Australian events, and an updated technical analysis for AUD/USD.

AUD/USD has been marked by great volatility throughout 2011, but traders would be wise to recall that at the   end of the day, the pair has recorded a 1% loss for the year to date. Thus the wild fluctations of the pair  are clearly somewhat deceiving, when  the movement of the pair  is examined with some perspective.

AUD/USD graph with support and resistance lines on it. Click to enlarge:

 

Private Sector Credit: Friday, 00:30.   The indicator dropped from 0.5% in October to a reading of  0.2% in November.  This was a dissapointing result, as the markets had predicted a reading of 0.4%. The  market forecast for December calls for a  rise up to 0.3%.

 

AUD/USD Technical Analysis
The pair opened the week at 0.9961,  and quickly breached parity (discussed last week), climbing all the way to 1.0219. The pair gave back  most of these gains, closing at 1.0139.

 

Technical levels from top to bottom:

We begin with the round number of 1.0733, which  is strong resistance. Next is the round number of  1.05, which  served as support in May and  June, and is now in a  resistance role.  Below is 1.0446, followed by the round number of 1.04, which is a strong level of resistance.  The next line of major resistance is 1.0336.  Next, the  level of 1.0260  is a weak line of resistance, which looks to be breached if the pair continues its upwards movement.  Parity  may  be an important psychological barrier,  but  has not  had a role in providing support or resistance to the movement of the pair.  Next is 0.9890, a weak support line. 0.9810 is  now  providing  strong support to the pair. Strong support for the assie can be seen at 0.9660, as well as the round number of 0.95, which was breached  only once in 2011. The final support level for now is at 0.9376.

I am  neutral  on AUD/USD

Economic indicators are clearly stronger in the US than in Australia, which would favor the greenback against the Aussie. However,  the  aussie rose above parity this week, showing renewed strength and climbing all the way  past the 1.02 level.  Will the aussie rally continue?

Further reading:

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