AUD/USD Finds Temporary Support at 0.8905

AUD/USD (daily chart as of February 28, 2014) broke down below the daily EMA 50 on February 26, and touched a low of 0.8902 yesterday, very close to the February 10 low of 0.8905. This is the first time that the pair closes below the daily EMA 50 since February 5. Note that the low of 0.8905 is close to the 38.2% Fibonacci retracement level from 0.9080 (February 17 high) to 0.8660 (January 24 low).

The higher than expected jobless rate and sluggish business investment also contributed to the pair’s recent decline amid China’s slowdown. Investors will be focusing on the RBA’s March 3 meeting with regard to its interest rate decision. The Aussie would be under pressure if the Reserve Bank of Australia shows any signs of easing bias.

Take a closer look at how price acted against the daily EMA 50, shown on chart with arrows. The pair broke out above the daily EMA 50 on February 5 with a strong bullish candlestick, and managed to stay above it for almost three weeks. Current price is testing the daily EMA 50. If it is unable to hold that support, it could decline further to test 0.8905 again. If 0.8905 serves as strong support, price could reverse up to challenge a short-term downtrend line connecting the February 17 and 24 highs (red trend line on chart).

Support levels below:
1st support: 0.8905 (multiple lows)
2nd support: 0.8825 (61.8% Fibonacci retracement level)
3rd support: 0.8660 (January 24 low)

Resistance levels above:
1st resistance: short-term downtrend line
2nd resistance: 0.9080 (February 17 high)
3rd resistance: 0.9170 (December 2 and 10, 2013 highs)