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AUD/USD Price Rally Vulnerable- Pullback to Offer Opportunity

AUD/USD Price Rally Vulnerable- Pullback to Offer Opportunity

2018-01-09 18:00:00
Michael Boutros, Strategist
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AUD/USD Daily Chart

AUD/USD Price Chart - Daily Timeframe

Technical Outlook: AUD/USD is carving out a well-defined monthly opening range just below a key near-term resistance range at 7887/98- this region is defined by the 61.8% retracement of the September decline & the October swing highs and converges on basic slope resistance extending off the 2017 high.

The immediate advance is at risk while below this threshold near-term and as noted in my Weekly Technical Perspective, “From a trading standpoint, I’m looking lower into the monthly open but ultimately a larger set-back would offer favorable long-entries within this confines of this broader uptrend.

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AUD/USD 240min Chart

AUD/USD Price Chart - 240min Timeframe

Notes: A closer look at price action sees Aussie turning just ahead of noted resistance with the pullback now testing interim support here at 7800/13. A break below this levels shifts the focus towards confluence slope support at ~7750s backed by the 2016 high-day close at 7735- both levels of interest for possible exhaustion / long-entries IF reached.

A topside breach of this formation would likely fuel accelerated gains for the pair with such a scenario targeting subsequent resistance objectives at 7991 and the 2017 high-day close at 8054. Bottom line: the immediate focus is on a break of the 7800-7898 range for guidance with a move lower to ultimately offer more favorable long-entries. Note that the economic docket is rather quiet until the tail end of the week with the U.S. Consumer Price Index (CPI) and Retail Sales on tap.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis mini-series

AUD/USD IG Client Sentiment
  • A summary of IG Client Sentimentshows traders are net-short AUDUSD- the ratio stands at -2.05 (67.8% of traders are long) – bearish reading
  • Retail has remained net-short since Dec 19; price has moved 2.3% higher since then
  • The percentage of traders net-long is now its lowest since Sep 07
  • Long positions are 8.0% lower than yesterday and 14.2% lower from last week
  • Short positions are 5.1% higher than yesterday and 21.0% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUDUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUDUSD-bullish contrarian trading bias from a sentiment standpoint.

See how shifts in AUD/USD retail positioning are impacting trend- Click here to learn more about sentiment!

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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

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