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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The Australian dollar has plummeted more than 2.6% from the late-September highs with the decline now approaching the yearly lows heading into the start of the 4Q. Here are the key targets & invalidation levels that matter on the AUD/USD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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AUD/USD Weekly Price Chart

AUD/USD Price Chart - Weekly

Notes: We’ve been tracking this descending pitchfork formation extending off the 2017 / 2018 highs in AUD/USD for months now. Last week price responded to a sliding parallel of the dominant slope extending off the August highs (red) with the subsequent decline now approaching the median-line / 78.6% retracement at 7107/20.

A weekly close below this key threshold is needed to keep the immediate short-bias viable with a break below the yearly lows at 7085 exposing the lower parallel (currently ~1.7010) and the 2016 low-week close at 6970. Initial resistance stands at the September high-week reversal close at 7223 with broader bearish invalidation lowered to 7327.

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

Bottom line: It’s make-or-break for Aussie heading into this key support zone and the monthly / quarterly open. From a trading standpoint, a good place to reduce short exposure and lower protective stops. We’ll be looking for a reaction / possible exhaustion down there for more guidance - I’ll publish an updated AUD/USD scalp report once we get further clarity in near-term price action. Keep in mind we’re just now beginning to carve out the October opening range with US Non-Farm Payrolls (NFP) on tap this Friday.

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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 +1.4 (58.4% of traders are long) – weak bearish reading
  • Traders have remained net-long since September 24th; price has moved 0.9% lower since then
  • Long positions are0.5% higher than yesterday and 11.1% higher from last week
  • Short positions are 5.1% lower than yesterday and 17.9% lower 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 further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUD/USD-bearish contrarian trading bias from a sentiment standpoint.

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

Relevant AUD/USD Data Releases

AUD/USD Economic Calendar

Economic Calendar– for the latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Previous Weekly Technical Perspectives

Learn how to Trade with Confidence in our Free Trading Guide

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

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