What’s driving any AUD/USD price moves is the USD side of the equation because the AUD side is and has been quite dead for many many months. Every week for many months the AUD 100 pip range story remains the same. Two explanations exist to dead exchange rates.
The RBA to align with other central bank structural changes has been in the midst of money market reforms and scheduled for completion this month and this time coincides with the BOE structural change end date. Secondly, structural changes maybe why we don’t see AUD money markets move. Europe is more volatile than Australia which is quite a commentary to dead Europe money markets. What emerges from the RBA will be a continued market oriented money market but the effects to AUD is so far undetermined. The questions are will the RBA allow AUD to move or will they continue to compress ranges.
AUD/USD 93 pip range is found from 0.7681 to 0.7588. On the high side of AUD is located a stasis line dated from 1999 at 0.7796. Many months ago this line was as high as 0.7803 but is now in progress and dropping by a few points each day. This high line explains why AUD sees lower highs. The point at 0.7796 must clear to see AUD far higher. We’re not excited regarding AUD to break this line anytime soon particularly when AUD trades for the past few weeks in overbought territory. For today, we;re looking at sell point at 0.7676 and this is pushing AUD’s upside limits. The point at 0.7668 looks more realistic.
On the bottom side, we’ve been tracking two lines and both are slowly rising by the day, 0.7478 and 0.7540. The point at 0.7540 is most important as its gaining speed by the day. AUD is heading for a showdown from rising 0.7540 to falling 0.7796. If AUD breaks rising 0.7540 then AUD will remain lower for longer and a break of 0.7796 then means higher for longer and targets 0.7900’s and 8000’s. Again no confidence in 0.7796 breaking anytime soon as the USD side will stop this move dead long before it reaches this destination.
What challenges 0.7540 is breaks at 0.7591 and 0.7580. We don’t expect to see it today however as the day’s bottom and long point is located at 0.7599. Outside 0.7599 is out of range.
Overall, current AUD/USD price is built upon solid bases at 0.7446 and 0.7383.
Brian Twomey, Inside the Currency Market, btwomey.com