Aussie Bounce Approaching, JPMorgan Says: Technical Analysis

The Australian dollar may be approaching a short-term retracement of losses against its U.S. counterpart, according to JPMorgan Chase & Co.

The Aussie may be due for a bounce as it weakens to support levels near parity with the U.S. dollar. A jump above $1.0485 would signal stabilization in risk sentiment and may mean the Australian currency will strengthen to as high $1.07, Niall O’Connor, a New York-based technical analyst at JPMorgan said in an interview. The currency has fallen 4.4 percent against the greenback over the past week.

“The burden of proof is on the bulls,” O’Connor said. “The $1.0485 area was where we saw it break down last week, and as long as it is under that level, the Aussie is vulnerable down to a cluster of support around 1.000. While there is still downside risk, we are close to some sort of bounce.”

The Australian dollar fell 0.9 percent today to $1.0222, from $1.0312 yesterday. The currency dropped to 99.28 U.S. cents on August 9, trading below parity for the first time since March. It reached $1.0765 on Sept. 1, the highest in a month.

The seven-day relative strength index for the Aussie versus the dollar fell to 26.3, trading below the 30 level for the first time since Aug. 10. A reading below 30 indicates an asset may have fallen too fast and may be due for a correction.

A support level is an area on a chart where analysts anticipate buy orders will be clustered. A break below 98.90 cents per U.S. dollar would imply the Australian dollar could weaken to 96 cents, O’Connor said.

“Aussie is about as oversold as it was at its August lows, which suggests it might try to stabilize,” he said.

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