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Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

Daniel Moss, Analyst

Australian Dollar Technical Forecast: Mixed

  • The Australian Dollar could slip lower against USD, however, further gains against JPY seem likely in the near term.
  • Head and Shoulders pattern hints at a bearish reversal for AUD/USD rate.
  • Ascending Triangle pattern points to further gains for AUD/JPY.

The Australian Dollar has been stuck in a relatively tight range against its lower-beta counterparts in recent weeks. However, a bearish Head and Shoulders suggests the risk-sensitive currency could be at risk of a reasonably significant decline against the US Dollar. Meanwhile an Ascending Triangle pattern points to further upside for AUDJPY rates.

AUD/USD Weekly Chart – Head and Shoulders Hints at Near-Term Pullback

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

Chart prepared by Daniel Moss, created with Tradingview

The AUD/USD exchange rate has continued to oscillate in a fairly tight 200 point range since storming to multi-year highs at the end of February.

Although the longer-term outlook appears relatively bullish, with a Golden Cross formation taking place on the moving averages, a Head and Shoulders topping pattern suggests that a downside push is on the cards in the coming weeks.

Breaching psychological support at 0.7600 is required to validate the bearish reversal pattern and trigger a pullback towards former resistance-turned-support at the August 2020 high (0.7413).

However, a weekly close back above 0.7800 could bring the yearly high (0.8007) back into the crosshairs.

AUD/USD Daily Chart – Double Top Pattern in Focus

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

Chart prepared by Daniel Moss, created with Tradingview

Zooming into the daily chart bolsters the near-term bearish bias portrayed on the weekly timeframe, as prices fail to clamber back above the Head and Shoulders neckline.

Slipping below the 8-EMA (0.7760) likely intensifies selling pressure and triggers a pullback to the trend-defining 55-EMA (0.7700). Hurdling that opens the door for sellers to drive the exchange rate back to key support at 0.7560.

Once again, a close above 0.7810 is needed to invalidate bearish potential and bring the yearly high into focus.

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

The IG Client Sentiment Report shows 44.58% of traders are net-long with the ratio of traders short to long at 1.24 to 1. The number of traders net-long is 11.93% higher than yesterday and 2.73% lower from last week, while the number of traders net-short is 5.94% lower than yesterday and 6.12% higher 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.

Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed AUD/USD trading bias.

AUD/JPY Weekly Chart – 8-EMA Guiding Price Higher

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

Chart prepared by Daniel Moss, created with Tradingview

AUD/JPY rates, in stark contrast to AUD/USD rates, appear poised to extend recent gains, as prices eye a push to retest the yearly high.

With the MACD tracking at its highest levels since 2017, and the RSI eyeing a push into overbought territory, the path of least resistance seems higher.

A weekly close above 84.60 probably signals the resumption of the primary uptrend and opens the door for the exchange rate to probe the 2017 highs just shy of 90.00.

On the other hand, if 84.60 holds firm, a pullback to former resistance-turned-support at 80.93 could be on the cards.

AUD/JPY Daily Chart – Ascending Triangle In Play

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

Chart prepared by Daniel Moss, created with Tradingview

An Ascending Triangle pattern carved out on the daily chart also hints at further upside for AUD/JPY.

Bullish moving average stacking, in combinations with both the RSI and MACD indicator tracking firmly above their respective neutral midpoints, is indicative of building bullish momentum.

A convincing close above 85.00 probably validates the continuation pattern, with the implied measured move suggesting price climbs an additional 3.5% from current levels to test 88.20.

However, if triangle resistance holds firm, a decline to the 34-EMA (83.75) would likely eventuate.

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Levels to Watch

The IG Client Sentiment Report shows 34.46% of traders are net-long with the ratio of traders short to long at 1.90 to 1. The number of traders net-long is 7.39% lower than yesterday and 1.21% lower from last week, while the number of traders net-short is 4.62% lower than yesterday and 5.08% higher 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

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

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