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The Australian Dollar has fallen more than 1.5% against the US Dollar from the recent three-month highs after failing to hold above yearly slope resistance. We’re looking for a low near upcoming support targets to identify whether this is just a correction or the resumption of the broader downtrend. These are the updated targets and invalidation levels that matter on the AUD/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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AUD/USD Daily Price Chart

AUD/USD Daily Price Chart

Technical Outlook: In my previous AUD/USD Price Outlook we noted that Aussie had, “broken above multi-month slope resistance and although the broader outlook remains constructive, the advance may be vulnerable near-term while below 7327/36.” Price registered a high at 7338 last week before turning over sharply with the pullback breaking back below the January parallel.

Interim support rests with the highlighted trendline confluence around ~7190s with broader focus higher while above 7142. Ultimately, a break below the yearly low-day close at 7087 would be needed to mark resumption of the broader downtrend. Initial resistance stands with the median-line around ~7280s with critical resistance steady at 7327/36- a breach / close above this threshold is needed to validate the reversal and would suggest that a more significant low was put in last month. Note the pending RSI support trigger extending off the October lows.

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AUD/USD 240min Price Chart

AUD/USD 240min Price Chart

Notes: A closer look at price action shows Aussie breaking below the slope series we’ve been tracking with AUD/USD still holding within the initial weekly opening-range. The near-term risk remains lower while below 7286 with near-term support eyed at 7190 and the Fibonacci confluence at 7142- an area of interest for possible exhaustion / long-entries if reached.

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Bottom line: Aussie has slipped back below the January parallel and IF this pullback is corrective, price should stabilize above 7142. From a trading standpoint, the immediate threat is still lower but we’ll favor fading weakness into the lower parallels with a breach above 7327/36 needed to validate a larger breakout

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 +1.39 (58.2% of traders are long) – bearishreading
  • Traders have remained net-long since November 13th; price has moved 0.4% higher since then
  • Long positions are 0.5% higher than yesterday and 2.5% higher from last week
  • Short positions are 12.2% higher than yesterday and 9.3% 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. Yet traders are less net-long than yesterday but more net-long from last week and 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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- Written by Michael Boutros, Currency Strategist with DailyFX

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