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AUD/USD Technical Outlook: Trading the Aussie Price Recovery

AUD/USD Technical Outlook: Trading the Aussie Price Recovery

2018-07-09 16:32:00
Michael Boutros, Technical Strategist
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The Australian Dollar responded to key long-term Fibonacci support last week with the recovery now approaching initial resistance objectives. These are the updated intraday targets & invalidations levels that matter on the AUD/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

AUD/USD Daily Price Chart

AUD/USD Price Chart

Technical Outlook: In last week’s Technical Perspective on the Australian Dollar, we noted that, “Aussie is testing downtrend support here and leaves the broader AUD/USD short-bias vulnerable while above 7327. We’ll be looking for further evidence that an exhaustion low is in place.” Price broke through the initial monthly opening-range highs on building bullish divergence late-last week with the Aussie rallying more than 2.3% off the monthly low.

The move keeps the broader focus higher while above the May lows / monthly open support at 7411/12 with daily resistance eyed at 7494 and the 61.8% retracement at 7537. Ultimately a breach above 7569 would be needed to suggest a larger-scale reversal is underway.

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AUD/USD 120min Price Chart

AUD/USD 120min Price Chart

Notes: A closer look at AUD/USD price action shows the pair trading within the confines of a well-defined ascending pitchfork formation extending off the June / July lows with price turning from confluence resistance today at 7476.

Interim support rests at 7450/55 backed by the median-line / weekly open at 7431. I’ll be looking for a reaction there – any lower would risk a drop towards 7411 & our bullish invalidation levels at 7397- both regions of interest for exhaustion / long-entries IF reached. A topside breach of the highs targets subsequent resistance objectives at 7494 and the upper parallel / 61.8% retracement at 7537.

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Bottom line: The immediate threat is for a deeper pullback here but I’ll favor fading weakness towards structural support levels starting at the median-line. Keep in mind the economic docket is rather light from Australia this week – keep an eye on the ongoing tariff talks with broader risk sentiment likely to take cues off crossing Trade War headlines. Join me on Friday for my Foundations of Technical Analysis webinar series to review this mechanics of trading this setup and more!

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

AUD/USD Trader Positioning

AUD/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long the AUD/USD- the ratio stands at +1.69 (62.9% of traders are long) – bearish reading
  • Traders have remained net-long since June 5th; price has moved 1.9% lower since then
  • Long positions are 0.5% lower than yesterday and 8.3% lower from last week
  • Short positions are3.8% lower than yesterday and 22.0% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall. Traders are more net-long than yesterday but less net-long from last week. The combination of current positioning and recent changes gives us a further mixed AUD/USD 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 AUD/USD Data Releases

AUD/USD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk

Other Setups in Play

- Written by Michael Boutros, Currency Strategist with DailyFX

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

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