The Australian dollar may fall to its lowest level in almost three years against its U.S. counterpart after failing to breach key technical levels of resistance, according to JPMorgan Chase & Co.
The Aussie may decline to 87.75 per U.S. dollar, its weakest level since Aug. 25, 2010, after bouncing off the resistance zone from 93.05 to 93.45, according to Niall O’Connor, a New York-based technical analyst at JPMorgan. Australia’s legal tender increased to 93.20 today before erasing its gain. The Aussie has been the worst-performing major currency over the past three months, decreasing 11 percent versus the greenback.
“The fact that we held that area near 93 today highlights the potential risk of additional weakness,” O’Connor said in a telephone interview. “We could see some downside follow-through. The overall setup is still bearish.”
Australia’s currency depreciated 1.7 percent, the most in a month, to 91.39 U.S. cents at 1:37 p.m. in New York after earlier gaining as much as 0.3 percent to 93.20.
The Aussie may appreciate to 94.40, a more than one-month high, if it breaks through resistance at 93.45, O’Connor said. That would be the currency’s strongest level since June 19.
“If it happened to rally to about 93.45, that would be a positive short-term development,” O’Connor said. “But it does look like that’s unlikely to happen given what we’ve seen in recent price action.”
The Aussie’s 8.8 percent decline this year trails just the yen’s 11 percent depreciation as the worst performing currency among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained the most with a 5 percent climb.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index. Resistance refers to an area on a chart where sell orders may be gathered, and support is an area where there may be buy orders.