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Australian Dollar Forecast: Key Levels to Watch on AUD/USD Breakdown

Australian Dollar Forecast: Key Levels to Watch on AUD/USD Breakdown

Justin McQueen, Strategist

Australian Dollar Analysis and Talking Points

  • AUD/USD | Rampant USD Weighs on AUD
  • IG Client Positioning Remains Net Long on AUD/USD

AUD/USD | Rampant USD Weighs on AUD

The Australian Dollar is among the underperformers against the greenback following a deterioration in risk sentiment, stemming from the persistent rise in US yields. The latest round of selling in the bond market had been a result of Fed Chair Powell sticking to the script and by that, I mean not attempting to back against the rise in US yields, having noted that the Fed looks at a broad range of measures for financial conditions and not just one security. Subsequently, AUD/USD is trading below its 50DMA, which has held its uptrend since November with losses extending passed the 0.77 handle. Looking ahead, while NFP will be in focus, eyes will remain firmly fixed on the bond market, in which a move higher in US 10s towards 1.61% is likely to see the AUD push towards support at 0.7600-20. On the topside, resistance is situated at 0.7730 and 0.7760-65 above.

AUD/USD Chart: Daily Time Frame

Source: Refinitiv

IG Client Positioning Remains Net Long on AUD/USD

Taking a look at IG client positioning data shows that 54.16% of traders are net-long with the ratio of traders long to short at 1.18 to 1. The number of traders net-long is 1.98% lower than yesterday and 38.26% higher from last week, while the number of traders net-short is 14.40% lower than yesterday and 11.73% lower from last week. Typically we take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall.Traders look to have attempted to buy the dip in the AUD as net-longs are higher than yesterday and last week, thus the combination of current sentiment and recent changes gives us a stronger AUD/USD-bearish contrarian trading bias.

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