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Aussie Dollar Declines Off Key Level

The Aussie dollar (6A) is declining after hitting a key resistance area near 0.77. After a strong rally to start 2016 the Australian dollar has been moving in a big range between 0.77/0.78 on the upper end and 0.72/0.7130 on the lower end.  This all follows a long-term decline in the currency.

The Aussie dollar will need to break through that upper resistance band in order to continue its upward progress. A definitive breakout above that band would signal a likely shift in the long-term trend and a move into the 0.84 region.  

Figure 1. Australian Dollar Futures, Continuous Daily Chart

Current price action reveals the range is likely continuing, though. Through much of February the price hovered near resistance, and in March has been dropping. A U.S. rate hike on March 15 would add to the downward pressure on the Aussie dollar. CME Fed Fund Futures are pricing in an 82% chance of a U.S. rate hike (% subject to change).

The decline off resistance doesn't mean the price will necessarily fall toward support at 0.72. In mid-2016 the price bounced around for several months forming a smaller range within the ranger one.

Overall, current price action favors the bears. Resistance has held and the price is moving lower within an overall range. Expect a large move on March 15. The outlook remains short-term bearish until the price can break through resistance. That said, if the price does fall toward the lower end of the range (near 0.72) that could present a favorable reward:risk buying opportunity.

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