AUD/USD Rebound Looks to 3Q Australia CPI for Fuel

Talking Points

• AUD/USDconstructive above 7590 heading into CPI
• Key resistance just ahead of 7700
• Updated targets & invalidation levels

AUD/USD Daily

Chart Created Using TradingView

Technical Outlook: AUDUSD has continued to trade within the confines of a well-defined ascending median-line formation dating back to the 2015 low with a sliding parallel extending off the 6/16 low now converging on the 61.8% retracement. We’ve been tracking this Aussie setup for some time on SB Trade Desk and heading into tonight’s 3Q Australia CPI release, the focus remains higher while above near-term confluence support at 7594.

Interim resistance stands with the monthly open at 7352 with a breach higher targeting 7678/90. Ultimately a close above the August high-day close at 7699 would be needed to validate a more meaningful breakout targeting 7735 & 7756. From a trading standpoint, I would be looking to fade weakness while above the weekly lows with a breach above 7700 clearing the way for a larger advance. A break lower invalidates the topside bias with such a scenario targeting the 61.8% retracement at 7554 & 7511. For the complete setup and to continue tracking this trade & more throughout the week- Subscribe to SB Trade Desk.

• A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net short AUDUSD- the ratio stands at -1.15 (46% of traders are long)- weak bullish reading
• Long positions are 6.2% lower than yesterday and 3.4% above levels seen last week
• Short positions are 6.1% higher than yesterday and 17.2% below levels seen last week.
• Open interest remains lackluster at 9.2% below its monthly average
• Although the recent dynamic gives a mixed trading bias, the recent strings of highs in AUD/USD have coincided with extremes in retail sentiment, with the key SSI threshold starting at -1.50. That said, the focus remains higher and we’ll be watching for a build in short positioning to suggest that the near-term advance may be nearing completion.

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Relevant Data Releases This Week

Other Setups in Play:

• EUR/CAD Rebound or Reversal? Line-in-the-Sand at 1.4600
• Webinar: USD, EUR Back at Yearly Open- US GDP in Focus
• NZD/JPY Signals Near-term Exhaustion Ahead of Key Resistance
• EUR/JPY Targeting Key Support Ahead of ECB

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

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