Australian Dollar Technical Forecast: AUD/USD Rally Eyes First Hurdle
Australian Dollar Technical Price Outlook: AUD/USD Weekly Trade Levels
- Australian Dollar updated technical trade levels – Weekly Chart
- AUD/USD rebound off technical support threatens test of yearly downtrend resistance
- Aussie resistance 6521/47, 6660/70, 6740 (key)- Support 6401, 6195, 5979-6041
The Australian Dollar surged more than 5% off the yearly lows against the US Dollar with a rebound off technical support threatening a test of the 2022 downtrend. These are the updated targets and invalidation levels that matter on the AUD/USD weekly technical chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Aussie technical setup and more.
Australian Dollar Price Chart – AUD/USD Weekly
Notes: In last month’s, Australian Dollar Technical Forecast I noted that AUD/USD was, “approaching multi-year downtrend support and we’re looking for a reaction in price on a stretch towards the lower parallel – watch the weekly close. From a trading standpoint, rallies should be capped by the monthly open at 6840 IF price is indeed heading lower with a close below 6621 needed to fuel the next major-leg lower in price.” Aussie plunged through support the following week with price plummeting more than 7% before rebounding off a technical confluence at the lower parallel / 2008 low-close around ~6195 (yearly low-close registered at 6199). AUD/USD has recovered more than 5% off the low with the rally now approaching the October opening-range high.
The immediate focus is on initial resistance at the 23.6% retracement of the yearly range / the October opening-range high at 6521/47. Subsequent resistance objectives eyed at the 2008 low-week close / 2019 low at 6660/70 with broader bearish invalidation lowered to the 38.2% retracement / April trendline at 6740– both levels of interest for possible topside exhaustion / price inflection IF reached. Monthly-open support rests at 6401 with a close below the 62-handle ultimately needed to mark resumption of the broader downtrend towards the Fibonacci confluence at 5979-6041.
Bottom line: The Australian Dollar has rebounded off confluent support and threatens a larger recovery within the broader downtrend. From at trading standpoint, look to reduce portions if long-exposure / raise protective stops on a stretch towards yearly channel resistance- losses should be limited by to the monthly open IF price is heading higher on this stretch. Note that the economic calendar presents significant event risk with US inflation data (PCE) on Friday and the RBA & FOMC interest rate decisions next week likely to fuel added volatility here. I’ll publish an updated Australian Dollar Short-term Price Outlook once we get further clarity on the near-term AUD/USD technical trade levels.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Australian Dollar Trader Sentiment – AUD/USD Price Chart
- A summary of IG Client Sentiment shows traders are net-long AUD/USD - the ratio stands at +1.64 (62.17% of traders are long) – typically bearish reading
- Long positions are 19.28% lower than yesterday and 16.62% lower from last week
- Short positions are 33.69% higher than yesterday and 30.45% 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. From a sentiment standpoint, the recent changes in positioning warn that the current AUD/USD price trend may soon reverse higher despite the fact traders remain net-long.
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--- Written by Michael Boutros, Technical Strategist with DailyFX
Follow Michael on Twitter @MBForex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.