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AUD/USD Price Outlook: Australian Dollar Affixed to its 200-DMA

AUD/USD Price Outlook: Australian Dollar Affixed to its 200-DMA

2019-12-13 20:17:00
Rich Dvorak, Analyst
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AUSTRALIAN DOLLAR OUTLOOK: AUD/USD PRICE CHART RIPS INTO RESISTANCE – AUSSIE BREAKOUT OR REVERSAL LOOMS

  • Spot AUD/USD prices have surged 4% since October’s swing low which has been due primarily to US-China trade deal optimism that flooded the market with risk appetite
  • The Australian Dollar is now on the brink of breaking out from a 23-month long downtrend, but its 200-day moving average has potential to thwart a sustained rebound attempt
  • IG Client Sentiment data notes a massive drop in net-long positioning on spot AUD/USD as Australian Dollar retail forex traders turn increasingly bearish toward the Aussie

Australian Dollar bears have been battered over the last 3-months with the recent spike in the Aussie – driven largely by to investor risk appetite seeping back into the market – pushing spot AUD/USD higher by 4% since its October swing low. A plunge in currency volatility and rise in relative attractiveness of the carry trade have also helped facilitate the rise in spot AUD/USD.

Though AUD/USD prices now face an intimidating zone of confluent resistance that could possibly send the Australian Dollar pivoting back lower. The 200-day simple moving average illustrates the Australian Dollar’s long-term downtrend etched out since January last year, which is a critical technical level that may very well hinder further upside in the Aussie – just as it did this past July.

AUD/USD PRICE CHART: DAILY TIME FRAME (JULY 2019 TO DECEMBER 2019)

AUDUSD Price Chart Australian Dollar Outlook Technical Analysis

Chart created by @RichDvorakFX with TradingView

AUD/USD has peaked its head above the downward-sloping trendline extended from July 19 and November 05 intraday highs, however, and there has been a healthy rise in its relative strength index.

Though the 0.6925 price level – an area of technical resistance highlighted by the 61.8% Fibonacci retracement of its July to October bearish leg – has so far proved to be a daunting obstacle that spot AUD/USD has yet to overcome. Correspondingly, the Australian Dollar’s lack of follow-through on its recent topside breakout is a bit discouraging.

AUD/USD BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -21% 11% -2%
Weekly -15% 7% -1%
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Yet, the Australian Dollar still has potential to keep rising with US-China trade deal cheerfulness likely to provide the Aussie with a positive tailwind. Likewise, there are several high-impact data releases and event risk scheduled on the economic calendar for next week which could provide fundamental catalysts for the next big move in spot AUD/USD.

AUD/USD PRICE CHART: WEEKLY TIME FRAME (OCTOBER 2017 TO DECEMBER 2019)

AUDUSD Price Chart Australian Dollar Outlook Technical Analysis

Chart created by @RichDvorakFX with TradingView

Turning to a weekly AUD/USD chart helps drown out some of the noise observed on a shorter time frame. The bottoming attempt by the Australian Dollar around the 0.6800 handle has likely contributed to the recent Bollinger Band squeeze – typically a precursor to a spike in volatility.

Although spot AUD/USD prices are currently riding the upper channel of its Bollinger Band, there are signs that the Bollinger Band width may be expanding which could enable a prolonged rally in the Australian Dollar.

That said, Aussie bulls could look to the psychologically-significant 0.7000 level as a possible upside target. On the other hand, spot AUD/USD remains at risk of reversing back lower until confirmation of a breakout higher is povided. Thus, the Aussie could still slide back toward the 0.6800 level before year-to-date lows come back into focus.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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