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Australian Dollar Forecast: AUD/USD Grinds into Downtrend Resistance

Australian Dollar Forecast: AUD/USD Grinds into Downtrend Resistance

2020-10-26 18:30:00
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 sets weekly / monthly open-ranges below downtrend resistance
  • Risk for further losses sub-7161 – Critical near-term support 7016/42
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The Australian Dollar is down just 0.53%against the US Dollar in October despite a monthly range of more than 3% with AUD/USD rebounding off critical support last week. A critical price range is in focus heading into the close of the month and we’re looking for the break for guidance. These are the updated targets and invalidation levels that matter on the AUD/USD price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Aussie 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 to be on the lookout, “for topside exhaustion ahead of the September channel resistance with a break below 7073/84 needed for another challenge at key yearly open support.” Aussie plummeted into the 2020/2019 yearly opens at 7016/42 last week before rebounding sharply with the recovery stalling just ahead of the October open at 7161 – we’re looking for a break of this key range for guidance in the days ahead.

A topside breach / close above this channel is needed to shift the broader focus higher again towards the 61.8% Fibonacci retracement of the September decline at 7256. A close below 7016 is needed to mark resumption with such a scenario exposing initial daily support objectives atthe 23.6% retracement of the yearly range at 6963.

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 within the confines of a descending pitchfork formationextending off the monthly highs with a rebound off the lower parallel last week failing at the 61.8% retracement of the October range at 7158 - note the monthly open / channel resistance just higher at ~7165. Look for inflection there IF reached with the immediate recovery vulnerable while below.

Initial support rests at the Friday low at 7101 backed by the 61.8% retracement of the near-term recent rally at 7073. Critical support steady at 7016/42 – a break / close below would suggest a larger correction is underway with initial objectives eyed at the 1.618% ext at 6987 and 6963.

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Bottom line: Australian Dollar is carving the weekly opening-range just below the monthly open / downtrend resistance – look to the breakout for guidance. From a trading standpoint, the risk remains for a deeper setback / topside exhaustion while below the September trendline with a break below yearly-open support needed to mark resumption. Ultimately, a topside breach / close above the October open would be needed to keep the near-term recovery viable. 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 Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short AUD/USD - the ratio stands at -1.20 (45.38% of traders are long) – weak bullish reading
  • Long positions are 5.69% higher than yesterday and 21.33% lower from last week
  • Short positions are18.12% higher than yesterday and 5.06% higher 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 further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUD/USD-bullish contrarian trading bias from a sentiment standpoint.
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 20% -9% -1%
Weekly 2% -11% -7%
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Key Australia / US Data Releases

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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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