AUD/USD: The Australian currency is still overvalued

November 5, 2014

Current trend

The currency pair AUD/USD continues to trade in the downward channel. Following the release of the negative US trade balance for September on Tuesday, the pair has reached the upper limit of the channel at the level of 0.8763. Today, the price has resumed downward movement, which was caused by the  European macro-statistics. It became known that retail sales volume in European countries has reduced by 1.3%.  On annual basis this index was also below the forecast, amounting 0.6%, which has led to the rise in the USD versus its main counterparts. Additional pressure on the AUD was caused by the statement of the head of the Australian Central banks, Mr. Glenn Stevens, who said that RBA is not planning to raise interest rate in the near future as long as the Australian dollar is overvalued.

Levels of support and resistance

Currently the pair is testing the level of 0.8620, which coincides with the bottom limit of the downward channel. In addition, the price has broken down the lower line of Bollinger bands, showing probability of the correction to up the levels of 0.8650 and 0.8680. After the correction the price can continue to decline to 0.8620 and 0.8580.

Technical indicators show that the quotes will continue to decline. Bollinger bands are directed downwards. MACD histogram is in the negative zone; its volumes have started to rise. Stochastic lines are also directed downwards.

Support levels: 0.8620 and 0.8580.

Resistance levels: 0.8650, 0.8680 and 0.8725.

Trading tips

In the current situation it makes sense to open long positions at the current price with take profit at the level of 0.8680. At the same level it is also advisable to open pending sell orders with the target of 0.8620.

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