Australian Dollar Technical Analysis - Talking Points
- Australian Dollar struggling to confirm reversal pattern
- Daily close above potential descending resistance eyed
- AUD/USD IG Client Sentiment outlook favors downside
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AUD/USD Technical Outlook
The Australian Dollar could be in the process of staging a comeback against the US Dollar, but finding fundamental follow-through may have to wait until US-China trade talks pass. Focusing on technical analysis and the AUD/USD daily chart below, I have highlighted a Morning Star candlestick pattern that formed during the transition from September into October.
With confirmation - via daily closes above the Morning Star - this pattern carries with it bullish implications. Thus far, this is lacking. The climb above the pattern on October 4 was immediately followed by a pullback. For confirmation, I would like to see a close above what could be a potential descending trend line from July – red-dashed line on the chart below.
A close above that resistance could signify a reversal of the dominant downtrend. For now, the Australian Dollar continues to consolidate around lows from March 2009. Overturning this candlestick pattern would entail falling through the key psychological barrier between 0.6678 and 0.6717. Let us take a look at the 4-hour chart to get a better picture of what could be near-term price action ahead.
AUD/USD Daily Chart
Here, AUD/USD managed to climb above near-term descending channel resistance going back to September 16 – parallel blue lines below. But, upside progress was lacking after prices stalled around 0.6771. For upside resumption, a push above this price may pave the way for a test of potential descending resistance highlighted on the daily chart above.
Australian Dollar Sentiment Outlook - Bearish
Meanwhile, the IG Client Sentiment report from October 7 showed that 69.13 percent of AUD/USD traders are net-long. They are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a strongerbearish contrarian trading bias. To learn more, join me every week on Wednesdays at 00:00 GMT as I uncover what market positioning is saying about recent trends in forex.
AUD/USD 4-Hour Chart
Australian Dollar Charts Created in TradingView
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--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
