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AUD/USD Price Analysis: Pending Consolidation Break to Fuel Next Leg

AUD/USD Price Analysis: Pending Consolidation Break to Fuel Next Leg

2018-05-18 17:00:00
Michael Boutros, Strategist
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The Australian Dollar has continued to trade within a 2% range (150pips) since the start of May trade with price setting a well-defined monthly opening-range just above weekly support. While the broader risk remains weighted to the downside, the immediate bias remains vulnerable near-term while above this week’s lows. Here are the levels that matter for AUD/USD heading into the close of the week.

AUD/USD Daily Price Chart

AUD/USD Price Chart - Daily Timeframe

Technical Outlook: In last month’s Weekly Technical Perspective we highlighted that a break of support in the Aussie left the, “near-term risk lower in price while below 7635. Subsequent support objectives are eye at the median-line / 50% retracement of the 2016 advance at 7480-7500.” Price is trading in this range now after registering a low at 7412 last week. Note that AUD/USD posted a weekly Doji off this support zone and the immediate downside bias remains vulnerable while above 7480 on a weekly close basis.

The daily chart is a bit messy here but the focus is on a break of the well-defined May opening-range to offer guidance. Initial resistance is eyed at 7567 with bearish invalidation steady at 7635. A break lower from here targets 7379 backed by the 61.8% retracement of the 2016 advance at 7327.

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AUD/USD 240min Price Chart

AUD/USD Price Chart - 240min Timeframe

Notes: A closer look at price action sees the Australian dollar consolidating just above the 7480 support zone- look for a break of this pattern. A topside breach risks a correction towards 7602 or even 7637 – both areas of interest for possible exhaustion IF reached.

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Bottom line: Aussie is testing BIG weekly support here and IF price is going to rebound, this would be a good spot. From a trading standpoint, if you’re short, look to move in protective stops just above this formation. A topside breach would offer opportunities to play the long-side targeting 7600 but be nimble- the broader outlook still remains tilted to the downside after breaking below slope support last month.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

AUD/USD IG Client Positioning

AUD/USD Client Positioning
  • A summary of IG Client Sentimentshows traders are net-long AUDUSD- the ratio stands at +2.14 (68.1% of traders are long) –bearishreading
  • Retail has remained net-long since April 19th; price has moved 3.6% lower since then
  • Long positions are 5.6% higher than yesterday and 13.5% higher from last week
  • Short positions are 0.5% higher than yesterday and 1.3% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUDUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUDUSD-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in AUD/USD retail positioning are impacting trend- Learn more about sentiment!

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Relevant Data Releases

AUD/USD Economic Calendar

Other Setups in Play

- 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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