Skimming along the bottom

The AUDUSD has moved to new lows in the current hour and is once again is skimming the lows that have limited most of the downside over the last 7 trading days.

Looking at the hourly chart below, the pair has had swing lows in the 0.7253-595 area over since July 24. Friday was an exception with a move to new lows going back to July 2009.

The weaker than expected US Employment Cost index on Friday put an end to that break. In fact the price moved above the 200 hour MA for the first time since July 22. That did not last long, however, as month end squaring, and perhaps some late afternoon comments from Fed's Bullard that the Fed was on track for September liftoff, sent the focus back on buying the greenback. Today, the price action has been up and down choppy, but down overall

What now?

Well there is a slew of economic releases later today in Australia along with an interest rate decision by the RBA.

  • Retail Sales (9:30 PM ET/0130 GMT) are expected to rise by 0.4% vs 0.3% last month
  • Trade balance ( p.m. ET/0130 GMT) is expected to show another deficit of -3000M vs -2751M last month. The trade balance has been deficit since March 2014
  • RBA interest rate decision (12:30 AM ET/0430 GMT) will be announced with expectation of no change.

That is a lot to take in so risk will be sky high. When risk is sky high, I look to step away from the fray and prepare for the post data/event trade. To do so, I look at the key technical levels.

What I see as important levels on the topside include the 100 hour MA and the 200 hour MA. The 100 hour MA (blue line in the chart above) comes in at 0.7301, while the 200 hour MA (green line in the chart above) comes in at 0.7312. As mentioned above, on Friday the price moved above both the 100 and 200 hour moving averages, but could not sustain any momentum. There been a few other attempts to get above the 200 hour moving average going back to July 15 (see red shaded areas in the chart above), with little success.

If the bullish data surprises, and/or the RBA/Gov. Stevens with a more hawkish statement/comments (not likely), a move above the 200 hour moving average (and staying above) will be needed. If done the 0.73408 and 0.7366 levels become the next upside targets.

On the downside, with the low from Friday at 0.7233 being the lowest level since 2009, a break below it should open the door for further down momentum. There is not a whole lot of support until the bottom trend line at the 0.7170 area (see chart above). Below that the March 2006 low of 0.7013 will be eyed. That would be a nice level for sellers to target.

Up until recently, the 0.7500 level was thought to be low the low floor for the AUDUSD. Since falling below that level on July 6th/7th, the price has not been above that line in the sand. That made the 0.7000, the next logical target for the pair. The price action over the last 7 days have stalled around 1/2 way to that 0.7000 level. On a break, traders will likely target the lower half of the expected range for the 1st time.