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Australian Dollar Forecast: Aussie Threatens to Snap Eight-Week Rally

Australian Dollar Forecast: Aussie Threatens to Snap Eight-Week Rally

2021-01-12 18:00:00
Michael Boutros, Strategist

Australian Dollar Technical Price Outlook: AUD/USD Weekly Trade Levels

  • Australian Dollar technical trade level update - Weekly Chart
  • AUD/USD breakout responds to uptrend resistance into 2021 yearly open
  • Aussie outlook remains constructive above 7385– key resistance 7801/36
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The Australian Dollar is down more than 0.4% against the US Dollar since the start of the week after responding to confluence uptrend resistance into the yearly open. While the broader Aussie outlook remains constructive, the immediate advance may be vulnerable while below this threshold in the weeks ahead and we’re on the lookout for inflection off this mark. These are the updated targets and invalidation levels that matter on the AUD/USD weekly price chart heading into the close of the year. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Aussie technical setup and more.

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Australian Dollar Price Chart – AUD/USD Weekly

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

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

Notes: In my last Australian Dollar Weekly Price Outlook we noted that the Aussie breakout was testing Fibonacci resistance at 7635 while citing that a, “breach higher from here exposes subsequent resistance objectives at the 2018 objective yearly open / upper parallel near ~7800 – look for a larger reaction there IF reached for guidance.” Price registered a high at 7820 into the yearly open before turning lower just ahead of confluence resistance at the upper parallel (red).

Initial weekly support now back at the median-line / 38.2% retracement at 7635 with key support / broader bullish invalidation now raised to the 2017 May low-week close at 7385 – look for a larger reaction there IF reached with a pivot below the 2017 high / high-week close at 7246/95 needed to suggest a more significant highs is in place. A topside breach from here would likely fuel an accelerated Aussie rally with such a scenario exposing channel resistance backed by the 2017 / 2018 highs at 8125/35.

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Bottom line: The Australian Dollar has responded to confluence uptrend resistance and while the broader outlook remains constructive, the rally may be vulnerable while below this threshold near-term. From at trading standpoint, a good zone to reduce long-exposure / raise protective stops- be on the lookout for downside exhaustion ahead of 7385 IF price is indeed heading higher with a weekly close above 7835 needed to mark resumption of the broader uptrend. Ultimately, a larger correction m ay offer more favorable opportunities closer to uptrend support. I’ll publish an updated Australian Dollar Price Outlook once we get further clarity on 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 Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short AUD/USD - the ratio stands at -1.14 (46.68% of traders are long) – typically bullishreading
  • Long positions are 2.75% higher than yesterday and 35.08% higher from last week
  • Short positions are0.84% higher than yesterday and 11.73% 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. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/USD price trend may soon reverse lower despite the fact traders remain net-short.
AUD/USD BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 3% -13% -6%
Weekly 14% -8% 1%
Learn how shifts in Aussie retail positioning impact trend
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Key Australia / US Data Releases

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

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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