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Australian Dollar Outperforms, Euro Struggles To Hold Above 100-Day SMA

Australian Dollar Outperforms, Euro Struggles To Hold Above 100-Day SMA

2010-07-20 15:09:00
David Song, Currency Strategist
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07.20_DWL1

The Australian dollar extended the advance from the previous day and rose to a high of 0.8815 during the overnight trade, but the short-term rally appears to be tapering off as price action fails to break above the 100-Day SMA at 0.8869. The AUD/USD is nearly 60pips higher from the open after moving 105% of its daily ATR, and the exchange rate may continue to hold along the 120-SMA at 0.8720 throughout the day as it appears to have found intraday support around the 20-Day SMA at 0.8656. Nevertheless, as the aussie-dollar lacks momentum to retrace the decline from May for the second-time around, we could see the exchange rate pare the advance from earlier this month, which could lead the AUD/USD to test the lower bounds (0.8550-60) of its recent range for near-term support.

07.20_DWL2


07.20_DWL3

The Euro weakened on Tuesday and slipped to a low of 1.2839 against the greenback, and single-currency appears to be carving a near-term top as price action struggles to hold above 1.3000. The EUR/USD is 60+pips lower on the day after moving 128% of its average true range, and the sharp decline during the overnight trade certainly appears to be tempering off as price action bounces back from the 240-SMA at 1.2852. As a result, we may see the exchange rate consolidate going into the Asian trade, which could push the euro-dollar back towards the 120-SMA at 1.2936 as the 30-minute rebounds from oversold territory. However, uncertainties surrounding the outcome of the European commercial bank stress test paired with the pull back in market sentiment may drag on the exchange rate throughout the week, but better-than-expected results would support the near-term rally from the June low (1.1879), which could lead the euro-dollar to retrace the decline from April.

07.20_DWL4

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To discuss this report contact David Song, Currency Analyst: instructor@dailyfx.com

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