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Australian Dollar Forecast: AUD/USD Breakout at Risk Below 2019 High

Australian Dollar Forecast: AUD/USD Breakout at Risk Below 2019 High

2020-07-28 15:00:00
Michael Boutros, Strategist
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Australian Dollar Technical Price Outlook: Near-term Trade Levels

  • Australian Dollar technical trade level update – Daily & Intraday Charts
  • AUD/USD attempting sixth weekly advance – Rally stalls at key Fibonacci resistance
  • Aussie constructive while above 7016- Resistance 7200 & 7295

The Australian Dollar is firmer against the US Dollar early in the week but the recent AUD/USD rally may be vulnerable on the back of a five week advance to fresh yearly highs. These are the updated targets and invalidation levels that matter on the AUD/USD price charts into the close of July trade with the FOMC interest rated decision on tap tomorrow. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Aussie trade setup and more.

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Australian Dollar Price Chart – AUD/USD Daily

Australian Dollar Price Chart - AUD/USD Daily - Aussie Trade Outlook - Technical Forecast

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

Technical Outlook: In my last Australian Dollar Price Outlook we noted that Aussie was, “attempting a breakout of major technical resistance / the yearly highs and keeps focus higher while within this formation.” The region in focus was 7016/42 where the 2019 and 2020 yearly opens converges on this year’s objective opening-range high. The breakout has lost some steam here at 6.18% retracement of the 2018 decline at 7131 with price straddling this region for the past few days.

Daily support steady back at 7016/42 with a break below the objective July open at 6903 needed to shift the broader focus lower in the Australian Dollar. Daily resistance stands at the late-February / April 2019 swing highs at 7207 backed by a critical confluence at the 2019 high / May 2017 low at 7295-7328- an area of interest for possible topside exhaustion IF reached.

Australian Dollar Price Chart – AUD/USD 120min

Australian Dollar Price Chart - AUD/USD 120min - Aussie Trade Outlook - Technical Forecast

Notes: A closer look at Aussie price action shows AUD/USD trading continuing to trade within the confines of the ascending pitchfork formationwe’ve been tracking off the late-June lows. A near-term range has taken shape just above initial support at 7121/31 – look to the break for guidance.

A move lower would expose the opening-range lows / weekly open support at 7082 backed by 7042- ultimately a break below confluence support at 7007/16 is needed to suggest a larger correction is underway. A breach higher from here keeps the focus on 7207 backed by the upper parallel, currently near ~7230s. The next major resistance hurdle on the topside eyed at 7295-7328.

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Bottom line: The Australian Dollar is working on a sixth consecutive weekly advance and while the broader outlook remains constructive, the immediate advance may be vulnerable after last week’s test of uptrend resistance. From at trading standpoint, a good zone to reduce long-exposure / raise protective stops – be on the lookout for topside exhaustion into the 72-handle with a break below this formation needed to shift the near-term focus lower. Ultimately a larger setback may offer more favorable opportunities closer to trend support. Review my latest Australian Dollar Weekly Price Outlook for a closer look at the longer-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 Retail Positioning- Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short AUD/USD - the ratio stands at -1.79 (35.87% of traders are long) – bullish reading
  • Long positions are 11.49% lower than yesterday and 25.61% higher from last week
  • Short positions are7.13% higher than yesterday and 14.41% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/USD prices may continue to rise. Traders are more net-short than yesterday but less net-short from last week. The combination of current positioning and recent changes gives us a further mixed AUD/USD trading bias from a sentiment standpoint.
AUD/USD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 13% 16% 15%
Weekly -15% 8% -4%
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Key Australia / US Data Releases

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

Economic Calendar - latest economic developments and upcoming event risk.

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- Written by Michael Boutros, 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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