AUD/USD Breakdown to Turn or Burn on Aussie Employment, US CPI

2016-11-16 19:46:00 Michael Boutros

Talking Points

AUDUSD at support- broader focus is lower heading into key AU, US data
Updated targets & invalidation levels
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Technical Outlook: Aussie has continued to trade within the confines of a descending median-line formation dating back to the October high with the decline breaking below key long-term structural support extending off the January low in overnight trade.

The exchange rate responded to confluence support today at 7462 – a level defined by the 50% retracement of the May advance and the lower parallel. Heading into tonight’s Australia employment report and subsequent US CPI release, the risk remains lower sub-7558 with a break lower targeting subsequent support objectives at 7420 and the 61.8% retracement at 7387.

A breach above the median-line / monthly open at 7608 would be needed to shift the broader focus higher in AUDUSD. From a trading standpoint, while we could see some upside off this support zone, I would be looking to fade strength / short-entries on a rally into structural resistance near the weekly open at 7525/44.

A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long AUD/USD- the ration stands at +1.93 (66% of traders are long)- bearish reading
Long positions are 14.7% higher than yesterday and 72.1% above levels seen last week.
Short positions are 8.4% lower than yesterday and 14% below levels seen last week.
Open interest is 5.6% higher than yesterday and 1.1% above its monthly average.
The current increase in long-positioning on building open interest suggests that retail crowds are attempting fade this decline, leaving the risk for further losses near-term. That said, it’s important to keep in mind the last time SSI extended into these levels was back in back in September as the exchange rate bottomed – (that low still holds). Look for an increase in short-exposure as price approaches support for indications that the decline may be reaching near-term exhaustion.

Relevant Data Releases