AUSTRALIAN DOLLAR ANALYSIS
- Risk on may benefit lagging AUD, CFTC.
- Australian export statistics remain strong.
AUD/USD FUNDAMENTAL BACKDROP
With an aggressive Federal Deserve hurting Aussie Dollar gains of recent, it may be time to look at a change in impetus for AUD. The Commitment of Traders (CoT) report has shown a consistent increase in overall long short positioning (see table below) leaving the currency overextended to the short side.
Source: CFTC
Recent comments by Russian Foreign Minister Lavrov eluded to the possibility of improving the current situation via talks, weakening the dollar as a safe haven option while shifting slightly ‘risk on’ in the process.
The commodity currency (green) has been declining on the back of a stronger commodities export data as seen in the graphic below (orange). A historically positive correlation, has now come under pressure from a stronger dollar. China’s is Australia’s largest trade partner and with the announcement of increased growth projections for 2022, Australia’s export data should remain elevated with hopes of the Aussie dollar playing catch up to the encouraging data.
Source: Refinitiv
AUD/USD TECHNICAL ANALYSIS
AUD/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Since February 2021 the Australian dollar has been on a gradual decline, reaching levels last seen pre-COVID. The Relative Strength Index (RSI) currently shows slowing bearish momentum which contrasts associating price action leading to potential bullish divergence. Bullish divergence typically follows subsequent upside in a price action as evident since the January swing low.
My forecast for the next few months favors AUD/USD upside towards the 0.7250 psychological level and beyond with markets largely pricing in the hawkish Fed – currently overpriced in my opinion giving rise to exaggerated USD downside should the central bank disappoint.
Key resistance levels:
- 0.7250
- 0.7183
Key support levels:
- 0.7100
- 0.7052
| Change in | Longs | Shorts | OI |
| Daily | 9% | -2% | 5% |
| Weekly | -18% | 48% | -4% |
Contact and follow Warren on Twitter: @WVenketas
