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Dow Jones, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

Dow Jones, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

Daniel Dubrovsky, Strategist

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.

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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, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

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.

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Dow Jones Futures - Daily Chart

Dow Jones, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

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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Dow Jones, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

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.

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AUD/USD – Daily Chart

Dow Jones, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

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.

Dow Jones, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

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

Dow Jones, Australian Dollar, Canadian Dollar Outlook: Positioning Bets

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

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

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