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Australian Dollar Price Outlook: Aussie Bears Testing AUD/USD Support

Australian Dollar Price Outlook: Aussie Bears Testing AUD/USD Support

2020-01-21 16:30:00
Michael Boutros, Strategist
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Australian Dollar Technical Price Outlook: Near-term Trade Levels

  • Australian Dollar technical trade level update – Daily & Intraday Charts
  • AUD/USD decline testing key support zones of interest
  • Aussie at risk for downside exhaustion ahead of 6809

The Australian Dollar is the worst performing currency among the majors against the US Dollar since the start of the week with Aussie down more than 0.3% in heading into the open of New York trad. The decline takes price towards key support zones just lower and the risk for downside exhaustion is mounting if the broader outlook is to remains constructive. These are the updated targets and invalidation levels that matter on the AUD/USD price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Aussie trade setup and more.

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Australian Dollar Price Chart – AUD/USD Daily

Australian Dollar Price Chart - AUD/USD Daily - Aussie Trade Outlook - Technical Forecast

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

Technical Outlook: In my last Australian Dollar Weekly Price Outlook we noted that the broader focus in Aussie was on a, “break of the 6851-6927 range for guidance with the broader outlook weighted to the topside in Aussie while above 6809.” AUD/USD is testing this bottom of this range today and we’re looking for a reaction. A close below would keep the focus on a more significant confluence zone / broader bullish invalidation near pitchfork support at 6809/21- a region defined by the 61.8% retracement of the October advance and the 61.8% extension of the decline off the December high. Note that daily RSI has continued to hold above the 40-threshold since the October lows – look to see if we maintain this constructive momentum profile.

Australian Dollar Price Chart – AUD/USD 240min

Australian Dollar Price Chart - AUD/USD 240min - Aussie Trade Outlook - Technical Forecast

Notes: A closer look at Aussie price action sees AUD/USD carving a weekly opening-range above near-term support at 6851. A break lower from here would expose key support at 6809/21- an area of interest for possible downside exhaustion / long-entries IF reached. Initial resistance stands with monthly trendline / weekly high at 6889 – a breach / close above this level would shift the focus back towards the 6924/27 resistance pivot – look for a bigger reaction there with a breach needed to put the bulls back in control.

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Bottom line: The immediate risk remains lower but we’re looking for downside exhaustion heading into upcoming support objectives ahead of 6800. From a trading standpoint, look to reduce short-exposure / lower protective stops on a test of these next two targets. Keep an eye out for possible downside exhaustion / long-entries this week on a stretch lower with a breach above the objective weekly range-highs needed to shift the near-term focus higher again. Review my latest Australian Dollar Weekly Price Outlook for a closer look at the longer-term AUD/USD technical trade levels.

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

Australian Dollar Trader Sentiment – AUD/USD Price Chart

Australian Dollar Trader Sentiment - AUD/USD Price Chart - Aussie Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long AUD/USD - the ratio stands at +1.76 (63.80% of traders are long) – bearish reading
  • Long positions are 2.34% higher than yesterday and 2.42% higher from last week
  • Short positions are9.39% lower than yesterday and 10.90% 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.
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% 0% 3%
Weekly 5% -12% -7%
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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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