Australian Dollar May Rise to 10-Month High: Technical Analysis

By Candice Zachariahs

July 22 (Bloomberg) -- The Australian dollar may advance toward a 10-month high after the currency climbed above a “pivotal resistance” point at 81.55 U.S. cents, BNP Paribas SA said, citing trading patterns. The so-called Aussie dollar has slipped 1.3 percent from the highest this year of 82.63 U.S. cents on June 3 as investors sold higher-yielding assets on concern that the second-quarter corporate earnings season would disappoint. The break above 81.55 cents suggests a six-week “corrective pullback” is over, Andrew Chaveriat, a technical strategist at BNP Paribas in New York, wrote in a note to clients yesterday.“Aussie should make a new cycle high,” Chaveriat wrote. Weekly momentum is expected to turn bullish, which “would increase the odds of hitting 83.80-85.20 cents.”

Australia’s currency fell 0.4 percent to 81.48 U.S. cents as of 9:52 a.m. in Sydney from 81.82 cents in New York yesterday. It last reached 85.19 cents on Sept. 22. The currency declined 0.6 percent to 76.25 yen.The currency will initially reach 83.80 cents, based on the 61.80 percent Fibonacci retracement of the Aussie’s decline from a record high of 98.50 cents on July 15, 2008, to its lowest point last year of 60.09 on Oct. 27, according to the report. From there it may rise toward 86.10 cents, wrote Chaveriat.Fibonacci analysis uses ratios, which are based on the sequence identified by an Italian mathematician in the 13th century, to predict support and resistance levels for prices. Support is where buy orders may be clustered, while resistance is where there may be sell orders.

Uptrend Remains
The Australian dollar may also rise against the yen after holding above 75.61 yen, the 50 percent Fibonacci retracement of the currency’s decline from 80.45 yen on June 11, RBC Capital Markets said.“The uptrend in Australian dollar-yen remains in place,” Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets, a unit of Canada’s biggest bank, wrote in a report today.In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.