AUD/USD Bullish Reversal in the Spotlight as RBA Takes Center Stage
- AUD/USD breakout under review ahead of RBA Interest Rate Decision
- Check out our 2Q AUD/USD projections in our Free DailyFX Trading Forecasts.
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Technical Outlook:We discussed this setup at length in today’s Strategy Webinar and heading into the Reserve Bank of Australia (RBA) interest rate decision later tonight, the focus is on the breakout of this descending pitchfork formation extending off the yearly highs. The near-term outlook remains weighted to the topside while above 7440 (note the monthly open at 7429) with a breach higher targeting a more critical resistance into 7530/40 - a region defined by the 200-day moving average & the 50% retracement of the March decline and converges on former trendline support extending off the May low. Key support & broader bullish invalidation rests at 7376.
Notes: While it’s too soon to rely on, a newly identified near-term pitchfork extending off the May lows further highlights the 7440/44 support confluence and keeps our focus higher while above this threshold. A breach above the median-line targets subsequent resistance objectives at 7515 & 7539/43.
From a trading standpoint, I’ll favor fading weakness while above confluence support heading into the release. A third of the daily average true range (ATR) yields profit targets of 22-25pips per scalp. Added caution is warranted heading the interest rate decision with the release likely to fuel increased volatility in the Aussie crosses.
- A summary of IG Client Sentiment shows traders are net-short AUD/USD- the ratio stands at -1.27 (44.1% of traders are long)- weak bullish reading
- Long positions are 5.9% lower than yesterday and 14.4% lower from last week
- Short positions are 16.5% higher than yesterday but 6.6% lower from last week
- Broader sentiment continues to point higher for Aussie with the recent build in short-positions further strengthening the bullish contrarian bias. That said, from at trading standpoint, I’ll still favor fading weakness while above structural support around ~7440/44.
See how shifts in AUD/USD retail positioning are effecting market trends- Click here to learn more about IG Client Sentiment indicators!
Relevant Data Releases
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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.