Dow Jones, AUD/USD, USD/CAD, Trader Positioning - Talking Points
- The Dow Jones may fall based on positioning signals
- Will AUD/USD & USD/CAD follow stocks or IGCS?
- I discuss technical analysis to show key hurdles ahead
In this week’s session on IG Client Sentiment (IGCS), I discussed the outlook for the Dow Jones while also discussing the trajectory for the growth-linked Australian Dollar and Canadian Dollar. IGCS is typically viewed as a contrarian indicator. For a more detailed overview that branches into fundamental analysis, check out the recording above.
Dow Jones Sentiment Outlook - Bearish
The IG Client Sentiment (IGCS) implies that 43 percent of Dow Jones traders are net long. Over the past day and week, net short bets have declined by 6.41% and 9.47% respectively. Recent changes in sentiment warn that the current Wall Street price trend may soon reverse lower despite the fact traders remain netshort. From a psychological standpoint, this could mean a rising share of investors attempting to pick the next top.
Dow Jones Technical Analysis
Technically speaking, Dow Jones futures may struggle to find further upside progress as prices struggle pushing above immediate resistance. This is a range between 26193 – 26658. Still, the push above near term falling resistance from June paints a cautiously upside bias. Immediately below is the 50-day simple moving average (SMA) which could curb deeper selling pressure.
Dow Jones Futures - Daily Chart
Dow Jones Chart Created in Trading View
AUD/USD Sentiment Outlook - Bullish
The IGCS gauge implies that 31.51% of retail investors are net long AUD/USD. Downside exposure has decreased by 3.41% over a daily basis while simultaneously increasing 19.62% from a week ago. Net long bets are also down 7.97% over the same periods. The combination of current sentiment and recent changes produces a stronger bullish contrarian trading bias.
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Australian Dollar Technical Analysis
AUD/USD has thus far struggled to find material upside progress after pushing above near term falling resistance from June – pink line. The Aussie paused recent gains on resistance at 0.7032. A resumption of the dominant uptrend from March entails taking out 0.7015 – 0.7064 which would open the door to testing July 2019 highs. Key support sits below as the 20-day SMA followed by the 0.6777 – 0.6840 barrier.
AUD/USD – Daily Chart
AUD/USD Chart Created in Trading View
USD/CAD Sentiment Outlook - Bearish
The IGCS gauge implies that 59.04% of traders are net long USD/CAD. Net short positioning has decreased by 16.12% and 0.77% over a daily and weekly basis respectively. Meanwhile, net long bets have increased by 7.77% and 14.20% over identical periods respectively. The combination of current sentiment and recent changes gives a stronger bearish contrarian trading bias.
Canadian Dollar Technical Analysis
On the daily chart below, USD/CAD is testing critical falling resistance from March’s top – red line. This could reinstate the dominant downtrend as prices look to clear key support below (1.3486 – 1.3521). Resumption of the downtrend entails then taking out 1.3314 – 1.3382. Otherwise, a close above the trend line, with confirmation, could open the door to a test of key resistance at 1.3686 – 1.3716.
USD/CAD – Daily Chart
USD/CAD Chart Created in Trading View
*IG Client Sentiment Charts and Positioning Data Used from July 7 Report
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
