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AUD/USD Rebound to Relent to CPI, FOMC- Key Support at 7450

AUD/USD Rebound to Relent to CPI, FOMC- Key Support at 7450

Talking Points

  • AUD/USD constructive above monthly open ahead of key data
  • Updated targets & invalidation levels

AUDUSD 30min

Chart Created Using TradingView

Technical Outlook: Aussie is coming off confluence support at the monthly open, trendline support extending off the May low and the 61.8% retracement of the post-Brexit advance at 7446/50. A breach above the initial weekly opening-range shifts the focus higher while above 7490.

A near-term slope has been identified off the lows and further highlighting near-term support with our bullish invalidation level set to the monthly open. A breach higher targets the monthly high-day reversal close / 61.8% retracement at 7571/75 backed closely by 7587 & the upper median-line parallel. Subsequent topside objectives are eyed at 7621 & 7644.

From a trading standpoint, heading into tonight’s Australia’s Consumer Price Index (CPI), I would be looking to fade Aussie weakness into structural support. Keep in mind that core CPI (Trimmed Mean) is expected to fall to 1.5%, which woudl be its slowest pace of growth on since records began in 1983. For the complete setup and to continue tracking this trade and more throughout the week- Subscribe to SB Trade Deskand take advantage of the DailyFX New Subscriber Discount.

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  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long AUDUSD- the ratio stands at +1.03(51% of traders are long)-weak bearishreading
  • Yesterday the ratio was +1.12. Long positions are 6.0% lower than yesterday and 8.0% below levels seen last week
  • Open interest is 2.2% lower than yesterday and 1.8% above its monthly average.
  • SSI flipped to net positive on July 19th and although SSI keeps the broader outlook weighted to the short-side, the pair is coming off interim support as long exposure is waning, suggesting that the immediate short-bias remains at risk heading into tonight’s inflation report. A flip to net-short alongside a breach above near-term resistance would suggest a larger advance is underway.

Help fine-tune you entries, click here to learn more about the DailyFX Grid Sight Index (GSI)

Relevant Data Releases This Week

Other Setups in Play:

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---Written by Michael Boutros, Currency Strategist with DailyFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.