Australian Dollar Price Outlook: Aussie Breakout Potential into FOMC

2019-09-17 18:30:00

Michael Boutros, Technical Strategist

Aussie rebounds off confluence support ahead of FOMC – weekly range-break to guide
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The Australian Dollar is virtually unchanged against the US Dollar since the start of the week and heading into tomorrow FOMC interest rate decision, the focus is on a break of the objective weekly opening-range for guidance. These are the updated targets and invalidation levels that matter on the AUD/USD price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro price setup and more.

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Australian Dollar Price Chart – AUD/USD Daily

Chart Prepared by Michael Boutros, Technical Strategist; AUD/USD on Tradingview

Technical Outlook: In my last Australian Dollar Price Outlook we noted that AUD/USD was vulnerable on the back of a 2.6% advance off the yearly lows with, “initial support at 6827/32 backed by 6803 – both levels of interest for possible downside exhaustion / long-entries IF reached.” Price registered a low today at 6830 before rebounding sharply – so was that it?

Its too early to tell, but with the FOMC on tap tomorrow, we’re look for clarity here. A topside breach above the high-close at 6880 would put Aussie back in play targeting 6911 and confluence resistance at the median-line / 61.8% retracement at 6927. Key daily support now 6791 with broader bullish invalidation at 6760/66.

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Australian Dollar Price Chart – AUD/USD 120min

Chart Prepared by Michael Boutros, Technical Strategist; AUD/USD on Tradingview

Notes: A closer low at Aussie price action sees AUD/USD continuing to trade within the confines of an ascending pitchfork formation extending off the August / September lows with the recent pullback finding support today at lower parallel / 6827/32. Initial resistance objectives at the weekly open at 6862 backed by 6880/84 – A topside breach of the weekly opening-range would be needed to mark resumption targeting 6911 and 6924/27.

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Bottom line: Aussie is rebounding off confluence support today and we’re on the lookout for a low / validation of a low in price. From at trading standpoint, the focus remains weighted to the topside while within this formation targeting a topside breach of the weekly range. Weakness beyond 6815 would suggest a larger correction is underway. Stay nimble here- expect volatility with the Fed is on tap tomorrow – IF price spikes lower, look to fade a final drop closer to daily slope support / the low-day close. A stretch into 6920s would have me looking for topside exhaustion / short entries. Review my latest Australian Dollar Weekly Price Outlook for a closer look at the longer-term AUD/USD technical trading levels.

Aussie Trader Sentiment – AUD/USD Price Chart

Aussie Trader Sentiment - Australian Dollar vs US Dollar Price Chart - AUD/USD Technical Outlook

A summary of IG Client Sentiment shows traders are net-long AUD/USD - the ratio stands at +1.11 (52.6% of traders are long) – weak bearish reading
Traders have remained net-long since July 19th; price has moved 1.5% lower since then
Long positions are 5.6% higher than yesterday and 9.5% lower from last week
Short positions are2.0% higher than yesterday and 13.9% 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 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.