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Australian Dollar May Wilt as AUD/USD Faces Bearish Warnings

Australian Dollar May Wilt as AUD/USD Faces Bearish Warnings

2020-05-01 03:30:00
Daniel Dubrovsky, Analyst
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Australian Dollar, AUD/USD, Technical Analysis – Talking Points

  • Australian Dollar at risk to reversal following bearish warnings
  • Majors-based AUD index attempting to break under key support
  • AUD/USD testing key rising support from March, will it hold?

Australian Dollar Technical Analysis

The Australian Dollar could be at risk to further losses following a couple of potential bearish technical developments. On the daily chart below is my majors-based Australian Dollar index, averaging AUD against USD, EUR, GBP and JPY. This index has formed a Bearish Engulfing and downside follow-through could place the Aussie’s broad uptrend from March at risk.

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Meanwhile the index appears to be on the verge of breaking under rising support from late March – red lines on the daily chart below. That has placed the focus on former resistance which could stand in the way as new support at 0.7660. A descent through this price could pave the way to retest lows from April as the Aussie risks generally losing value against some of its major counterparts.

It should be noted however that the technical bias turned increasingly bullish after the Aussie cleared falling resistance from the beginning of this year – pink-dashed line. In the event of a false downside breakout, prices may turn higher on the way back towards peaks from February. Beyond that sits the well-defined falling resistance from 2017 – blue line.

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Majors-Based Australian Dollar Index

Australian Dollar May Wilt as AUD/USD Faces Bearish Warnings

Chart Created Using TradingView

AUD/USD Technical Analysis

Focusing on AUD/USD specifically, the pair has turned lower following the emergence of negative RSI divergence on the 4-hour chart below. Rising support from late March – blue lines – seem to be maintaining the upside bias. If these hold, AUD/USD could bounce and set course to retest 0.6570 on the way towards 0.6646. The latter is the lower boundary of resistance from early March.

A break under critical rising support could be noteworthy, especially if there is follow-through. A key barrier below is the former range of resistance between 0.6432 – 0.6443 which could stand in the way as new support. Beyond that sits the barrier between 0.6385 to 0.6407. Where prices could then meet formidable buying pressure are late-April lows between 0.6250 to 0.6266.

A fall through the latter could further increase the likelihood of a material reversal in the Aussie from a medium term perspective. The importance of seeking confirmation in technical analysis, especially during such unprecedented volatile times, is arguably increased. From a fundamental view, recent Trump-China tariff retaliation threats seems to have resurfaced risk aversion in markets which could weigh on AUD/USD.

AUD/USD BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 17% 10% 14%
Weekly 15% -7% 4%
What does it mean for price action?
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AUD/USD 4-Hour Chart

Australian Dollar May Wilt as AUD/USD Faces Bearish Warnings

Chart Created Using TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

https://www.tradingview.com/symbols/AUDUSD/?exchange=FX_IDC

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

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