- AUDUSD rally testing multi-month resistance range- Immediate long-bias at risk below
- Updated targets & invalidation levels
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Technical Outlook:AUDUSD is probing a key resistance range we’ve been tracking for the past few months at 7735/56- this region is defined by basic trendline resistance, the 88.6% retracement of the April decline & the 2016 high-day close and has continued to cap rallies in Aussie since August. The focus is on this key range heading into the close of the month with a close above needed to mark a more significant breakout opportunity in the pair. That said, the immediate advance remains at risk while below this threshold with interim support seen at the monthly open 7656.
Notes:A look at the intraday chart highlights a near-term slope originating off the monthly lows with the weekly opening range now taking shape just below the 7735/56 resistance zone- look for the break with a move sub-7651/56 needed to mark a more meaningful correction in the pair. Such a scenario targets subsequent objectives at 7620 & 7591. Broader bullish invalidation rests at 7542/47 (3/3 swing low / 200-day moving average).
A breach topside breach still has to contend with the November high at 7778- but beyond that, it should be smooth sailing to 7835. From a trading standpoint, I’ll be looking for exhaustion around these levels with a deeper pullback to offer more favorable long opportunities into structural support – the first of which would be the monthly open. Keep in mind seasonal tendencies favor USD weakness (i.e. AUDUSD strength) heading into the start of April trade.
A quarter of the daily average true range (ATR) yields profit targets of 17-22pips per scalp. Most of the event risk this week will come from the USD with the release of the February Durable Goods Orders on Friday highlighting the economic docket.
- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net-short AUDUSD- the ratio stands at -2.28 (30.5% of traders are long)- bullish reading
- Traders have been net-short since January 9th when Aussie was trading near 7182- Since then, the pair has rallied 7.7%
- Long positions are 4.5% higher than yesterday and 9.9% lower from last week
- Short positions are 5.2% higher than yesterday and 19.0% higher from last week
- While SSI continues to broadly point higher, it’s worth noting that the recent build in open interest & recovery in SSI off the monthly lows suggest the immediate bullish bias is at risk- especially as prices press key resistance.
Relevant Data Releases
Other Setups in Play:
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- Written by Michael Boutros, Currency Strategist with DailyFX