Near-term Setups in AUD/USD, EUR/USD & DXY
Earlier in the week we highlighted a key multi-month resistance range in AUDUSD at 7735/56. Aussie registered a high at 7749 before reversing sharply yesterday with the decline rebounding off near-term support at 7651/56. A newly identified pitchfork extending off the thighs keeps the immediate focus lower while below the median-line which converges on the 50% retracement at 7694 with a break lower targeting subsequent support objectives at 7620 & 7591. Broader bearish invalidation remains steady at 7735.
- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net-short AUDUSD- the ratio stands at -2.49 (28.6% of traders are long)- bullish reading
- Long positions are 20.4% lower than yesterday and 10.4% lower from last week
- Short positions are 21.1% lower than yesterday and 4.7% lower from last week
- Note that the recent fall in open interest on a recovery in the SSI ratio off recent extremes as price comes off key resistance continues to highlight the risk for a pullback in in the pair despite the current SSI standing.
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EURUSD: The focus is on a pullback from near-term confluence resistance at 1.0820/22 with our broader outlook still weighted to the topside while above the 1.07-handle. A breach above target a more significant resistance zone at the 2016 open at 1.0872. Levels remain unchanged from last week’s EURUSD update.
DXY: We warned about the risk for a turn in the dollar index heading into the Fed last week with the decline reversing today just ahead of confluence support at 99.43/53- a region defined by the 61.8% extension of the decline off the yearly high and the January 2016 high-day close. The immediate short-bias is at risk into this zone with our broader focus still weighted to the downside sub 100.39. A break lower targets subsequent support targets at the 99-handle & the 2016 open at 98.69.
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---Written by Michael Boutros, Currency Strategist with DailyFX
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