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AUD/USD Price Analysis: Aussie Consolidation in Focus ahead of RBA

AUD/USD Price Analysis: Aussie Consolidation in Focus ahead of RBA

2018-08-06 16:42:00
Michael Boutros, Technical Strategist
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The Reserve Bank of Australia (RBA) interest rate decision is on tap tonight and Aussie is trading right in the middle of a multi-month consolidation pattern we’ve been tracking for weeks now. Here are the updated targets and invalidation levels that matter for AUD/USD heading into the release. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

AUD/USD Daily Price Chart

AUD/USD Daily Price Chart

Technical Outlook: In my Weekly Technical Perspective on the Australian Dollar, we highlighted that the, “broader short-bias is vulnerable while above 7327. From a trading standpoint, we’re looking for a break of the 7327-7505 range for further guidance.” Aussie has continued to consolidate within the confines of the initial June opening range with major event risk on tap this week.

Resistance stands with the July trendline / May low-day close around ~7445/56 with critical support steady at 7327- a break / close below this level would exposes subsequent support objectives at 7230 and the 2017 open at 7200. Ultimately a breach above 7494 would be needed to suggest a more significant low is in place.

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AUD/USD 240min Price Chart

AUD/USD 240min Price Chart

Notes: A closer look at AUD/USD price action further highlights this consolidation pattern with the lower bounds of the range now converging on the key 7327/36support zone- a region defined by the yearly low-day close and the 61.8% retracement of the 2016 advance. A downside break targets 7298 backed by 7230. Initial resistance stands at the May lows at 7412 backed by the trendline resistance and 7456.

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Bottom line: We’re looking for a break of this consolidation range in Aussie with event risk this week likely to offer a catalyst in price. Specifically, looking for a reaction off the 7327/36 zone with the broader short-bias at risk while above this threshold. From a trading standpoint, I still favor fading weakness into this zone but RESPECT the break- IF we get it, it’s likely to be rather sharp and decisive.

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

AUD/USD Trader Sentiment

AUD/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long AUD/USD - the ratio stands at +1.87 (65.1% of traders are long) – bearish reading
  • Traders have remained net-long since June 5th; price has moved 2.3% lower since then
  • Long positions are4.1% higher than yesterday and 7.7% lower from last week
  • Short positions are 9.8% higher than yesterday and 1.8% 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/USD price trend may soon reverse higher despite the fact traders remain net-long.

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

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Relevant AUD/USD Economic 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

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

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