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Australian Dollar Price Outlook: Aussie Plummets to Downtrend Support

Australian Dollar Price Outlook: Aussie Plummets to Downtrend Support

2020-03-13 16:30:00
Michael Boutros, Strategist
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Australian Dollar Technical Price Outlook: AUD/USD Weekly Trade Levels

  • Australian Dollar technical trade level update - Weekly Chart
  • AUD/USD plunges to fresh eleven-year lows / multi-year downtrend support
  • Aussie broader risk remains lower sub-6500

The Australian Dollar plummeted more than 5.4% against the US Dollar this week with a massive reversal candle taking Aussie to fresh eleven-year lows. Price has responded to downtrend support and the focus is on a reaction here at the lower bounds of a multi-year formation we’ve been tracking. These are the updated targets and invalidation levels that matter on the AUD/USD weekly price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie trade setup and more.

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Australian Dollar Price Chart – AUD/USD Weekly

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Chart Prepared by Michael Boutros, Technical Strategist; AUD/USD on Tradingview

Notes: In last month’s Australian Dollar Price Outlook we noted that AUD/USD was, “testing support at multi-year lows and leave the immediate short-bias at risk while above 6660.” Aussie rebounded to a high of 6750 before breaking lower into the close of February with price plummeting more than 11% off the yearly open / highs.

The Australian Dollar has continued to trade within the confines of a well-defined descending pitchfork formation dating back to the 2018 highs. The Aussie sell-off rebounded just ahead of confluence support near the lower parallel / 2008 low close at 6196 (low registered at 6211). This week’s candle marks the largest weekly range since June 2013 and the largest single-week decline since September 2011. In both instances, price continued lower in the following weeks before mounting a more significant recovery.

That said, price is now testing downtrend support and leaves the immediate short-bias at risk while above pitchfork support. Initial resistance eyed at 6341 with medium-term bearish invalidation at the median-line / 6507. A break lower from here would likely fuel accelerated losses for Aussie with such a scenario exposing initial support objectives at the 2008 swing low / 6006- look for a more significant reaction there IF reached.

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Bottom line: The Australian Dollar breakdown is testing downtrend support and the immediate focus is on a reaction off this slope. From a trading standpoint, a good region to reduce short-exposure / lower protective stops- look for topside exhaustion ahead of 6507 IF price is heading lower with a breach / close above needed to shift the focus higher. I’ll publish and updated Australian Dollar Price Outlook for a closer look at the near-term AUD/USD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Australian Dollar Trader Sentiment – AUD/USD Price Chart

Australian Dollar Trader Sentiment - AUD/USD Price Chart - Aussie Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long AUD/USD - the ratio stands at +2.39 (70.50% of traders are long) – bearish reading
  • Long positions are 5.06% lower than yesterday and 34.38% lower from last week
  • Short positions are22.94% lower than yesterday and 34.17% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall. Traders are more net-long than yesterday but less net-long from last week and the combination of current positioning and recent changes gives us a further mixed AUD/USD trading bias from a sentiment standpoint.
AUD/USD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% -4% 2%
Weekly 20% 34% 27%
Learn how shifts in Aussie retail positioning impact trend
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Key Australia / US Data Releases

Key Australia / US Data Releases - Aussie Event Risk - AUD/USD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk.

Previous Weekly Technical Charts

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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