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Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Key Levels

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Key Levels

Daniel Moss, Analyst

Australian Dollar Technical Forecast: Mixed

  • AUD/USD eyeing a test of support at the 55-EMA after slicing through the Pitchfork median line.
  • AUD/JPY rates attempting to consolidate above the 61.8% Fibonacci.
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Although the long-term technical outlook for the Australian Dollar remains skewed to the topside, recent developments suggest that the commodity-sensitive currency could lose ground in the coming days against its haven-associated counterparts. Key levels to watch for AUD/USD and AUD/JPY rates.

AUD/USD Monthly Chart – Cyclical Upturn at Hand

AUD/USD Monthly Chart

AUD/USD monthly chart created using Tradingview

The chart above highlights the cyclical nature seen in AUD/USD rates over the past 24 years, with the currency pair largely adhering to what appears to be an 8-year rotation. It has set significant bottoms in early 2001, late 2008 and 2016.

Recent price action looks strikingly similar to that seen early in the bullish cycle ignited in September 2001 and could be indicative of further upside for AUD/USD, given price has surged away from long-term trend resistance-turned-support extending from the 2013 high and remains constructively perched above 0.7600.

Moreover, with the RSI breaking above the downtrend extending from the 2004 extremes – in a similar fashion to late 2002 – a shift in overall market sentiment seems to be taking shape.

With that in mind, the trade-sensitive exchange rate could be poised to substantially extend its recent 44% surge from the March 2020 nadir, with cycle analysis suggesting AUD/USD may rise as much as 33% from current levels to eventually peak in late 2025.

AUD/USD Daily Chart – Eyeing Key Support at 55-EMA

AUD/USD Daily Chart

AUD/USD daily chart created using Tradingview

However, zooming into the daily chart suggests that the commodity-sensitive Australian Dollar could slide lower against the Greenback in the near term, as prices slices through the Pitchfork median line and key support at the January high (0.7820).

With the RSI diving back towards 50, and a bearish MACD crossover taking shape, further losses appear in the offing.

A daily close below 0.7800 would probably pave the way for sellers to drive price back towards confluent support at the January 5 low (0.7660) and trend-defining 55-EMA.

Alternatively, climbing back above the 8-EMA (0.7841) could open the door for the exchange rate to retest the yearly high (0.8007).

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Key Levels

The IG Client Sentiment Reportshows 46.30% of traders are net-long with the ratio of traders short to long at 1.16 to 1. The number of traders net-long is 9.65% higher than yesterday and 20.73% higher from last week, while the number of traders net-short is 29.76% lower than yesterday and 31.12% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/USD prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/USD price trend may soon reverse lower despite the fact traders remain net-short.

AUD/JPY Daily Chart – Looking to Consolidate above 61.8% Fibonacci

AUD/JPY Daily Chart

AUD/JPY daily chart created using Tradingview

AUD/JPY rates could also be at risk of extended losses, after the formation of a bearish Shooting Star reversal candle just shy of psychological resistance at 85.00 triggered a pullback to former resistance-turned-support at February 17 high (82.29).

A daily close below 82.30 could generate a more extended pullback towards the 34-EMA (81.27), with a convincing push below bringing range support at 80.40 – 80.70 into the crosshairs.

Conversely, if psychological support at 82.00 holds firm a rebound back towards the yearly high (84.95) could be on the cards.

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Key Levels

The IG Client Sentiment Report shows 32.67% of traders are net-long with the ratio of traders short to long at 2.06 to 1. The number of traders net-long is 37.14% lower than yesterday and 31.96% lower from last week, while the number of traders net-short is 6.21% lower than yesterday and 17.82% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/JPY prices may continue to rise.

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger AUD/JPY-bullish contrarian trading bias.

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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

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