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Aussie Dollar Outlook: AUD/USD Closes Strong Week w/ Bearish Engulf

Aussie Dollar Outlook: AUD/USD Closes Strong Week w/ Bearish Engulf

2019-12-14 16:00:00
Michael Boutros, Technical Strategist
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Aussie pared a portion of the weekly advance on Friday as price rally stalled at fresh four-month highs. Here are the levels that matter on the AUD/USD weekly chart.

The Australian Dollar is up more than 0.40% against US Dollar this but closed well off the weekly highs with Aussie trading 6869 ahead of the New York close on Friday. The immediate Aussie rebounding remans vulnerable heading into next week. but losses should be limited to this week’s lows IF price is indeed heading higher. These are the updated targets and invalidation levels that matter on the AUD/USD weekly chart. Review this week's Strategy Webinar for an in-depth breakdown of this Aussie price setup and more.

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Australian Dollar Chart – AUD/USD Weekly

AUDUSD Weekly Price Chart

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

Notes:In my last Australian Dollar Weekly Price Outlook we noted to be that we were, “looking to fade downside exhaustion,” while above key support at the 2019 low-week close at 6768. AUD/USD registered a low at 6754 two weeks later before reversing sharply higher with the rally failing this week just above the October high / 61.8% retracement of the July decline at 6927- an outside-day reversal on Friday further suggests the advance remains vulnerable heading into the start of the week. Note that weekly RSI has remained below the 60-threshold since January 2018 – a breach above with a close higher here would be needed to validate a larger turn in price.

Initial weekly support now at the 2016 low at 6827 backed closely by the highlighted trendline confluence around ~6800. Broader bearish invalidation remains steady at 6768. A topside breach / close above 6927 is needed to fuel the next leg higher targeting subsequent resistance objectives at the 100% ext at 7013 and the yearly open / 61.8% retracement at 7042/59- critical.

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

Bottom line: The Australian Dollar failed at fresh four-month highs this week and while the immediate threat is for further losses heading into next week, the trade remains constructive while above 6800. From a trading standpoint, looking to fade weakness while within this ascending channel targeting a topside breach of this week’s highs towards the 70-handle. Ultimately weakness below the low-week close would risk another test of the yearly lows nearly 6677. I’ll publish and updated Australian Dollar Price Outlook once we get further clarity on the near-term AUD/USD technical trading levels.

Australian Dollar Trader Sentiment – AUD/USD Price Chart

AUDUSD Client Sentiment
  • A summary of IG Client Sentiment shows traders are net-long AUD/USD - the ratio stands at +1.22 (55.01% of traders are long) – bearish reading
  • Long positions are 8.93% lower than yesterday and 17.43% lower from last week
  • Short positions are22.09% lower than yesterday and 9.91% 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 morenet-long than yesterday but less 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.
AUD/USD BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% -5% -4%
Weekly 8% -19% -2%
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Previous Weekly Technical Charts

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--- Written by Michael Boutros, Technical 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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