In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The Australian Dollar is up more than 6.5% off the monthly lows after briefly dipping to levels not seen since March of 2009. The advance is now targeting the first major resistance hurdle and a make-or-break level for the bulls. Here are the key targets & invalidation levels that matter on the AUD/USD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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AUD/USD Weekly Price Chart
Notes: In last month’s Australian Dollar Weekly Technical Outlook we continued to highlight the descending pitchfork formation we’ve been tracking off the 2017 & 2018 highs with our ‘bottom line’ focus lower while below 7385”. Aussie briefly broke below a critical support zone at 6828/55 before posting a massive outside-weekly reversal higher amid ongoing bullish divergence in momentum.
The advance is now targeting confluence resistance just higher at the 76.4% retracement / upper parallel around 7240– a breach / close above this threshold is needed to validate a larger reversal with such a scenario targeting 7327 and 7440. IF price has put in a near-term low, losses should not surpass support at the October swing low / 2019 low-day close at 7005/21 (bullish invalidation).
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Bottom line:The AUD/USD reversal is approaching the first major resistance hurdle, and a make-or-break pivot just higher near 7240s – look for a reaction there IF reached. From a trading standpoint, the focus remains on a stretch into this region with a close above needed to suggest that a larger turn is underway. The immediate advance looks a bit vulnerable so look for pullbacks to hold above the monthly open. I’ll publish an updated AUD/USD technical outlook once we get further clarity on near-term price action.
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AUD/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long AUD/USD – the ratio stands at +1.19 (+54.2% of traders are long) – weak bearish reading
- Traders have remained net-long since December 4th; price has moved 1.7% lower since then
- Long positions are 9.7% lower than yesterday and 17.5% lower from last week
- Short positions are 17.7% higher than yesterday and 85.0% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/USD price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in AUD/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant AUD/USD Data Releases
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex