Australian Dollar Technical Analysis: AUD/JPY, AUD/USD Rates Outlook
Australian Dollar Outlook:
- AUD/JPY rates have fallen back into a former bull flag, which suggests a deeper setback towards the ascending trendline from the March 2020 and December 2021 lows is possible.
- AUD/USD rates set fresh yearly lows today, suggesting that the bottom has not yet been reached.
- According to the IG Client Sentiment Index, AUD/JPY rates have a mixed bias while AUD/USD rates have a bullish bias.
Commodities Weigh on Aussie
A bout of weakness in base metals, energy, and precious metals is hurting the commodity-linked Australian Dollar. Alongside a backdrop of generally deteriorated risk appetite over the past few weeks and a Reserve Bank of Australia that has disappointed rate hike expectations, the Australian Dollar remains mired in a downtrend. Technical weakness in the two major AUD-crosses, AUD/JPY and AUD/USD rates, hints that bears remain firmly in control.
AUD/USD RATE TECHNICAL ANALYSIS: DAILY CHART (October 2021 to October 2022) (CHART 1)
AUD/USD rates established a fresh yearly low during today’s session, hinting that the sharp downtrend in place since mid-September remains the primary driver of price action. Momentum remains overtly bearish with the pair below its daily 5-, 8-, 13-, and 21-EMA envelope, which is in bearish sequential order. Daily MACD continues to trend lower below its signal line, while daily Slow Stochastics are holding in oversold territory. AUD/USD rates may be aiming for a cluster of Fibonacci retracements just above 0.6100 in the near-term.
IG Client Sentiment Index: AUD/USD RATE Forecast (October 11, 2022) (Chart 2)
AUD/USD: Retail trader data shows 75.72% of traders are net-long with the ratio of traders long to short at 3.12 to 1. The number of traders net-long is 3.03% lower than yesterday and 4.55% higher from last week, while the number of traders net-short is 1.36% higher than yesterday and 10.34% higher 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.
Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/USD price trend may soon reverse higher despite the fact traders remain net-long.
AUD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (October 2021 to October 2022) (CHART 3)
AUD/JPY rates have made an important development in recent days, falling back into the bull flag that was carved out between June and August while also dropping below the 61.8% Fibonacci extension of the March 2020 low/May 2021 high/August 2021 range at 92.92 and the 76.4% Fibonacci retracement of the 2013 high/2020 low range at 94.68. With momentum indicators firmly bullish – the pair is below its daily 5-, 8-, 13-, and 21-EMA envelope, which is in bullish sequential order, daily MACD is trending lower below its signal line, and daily Slow Stochastics have in oversold territory – further losses towards the ascending trendline from the March 2020 and December 2021 lows above 88.00 can’t be ruled out over the coming weeks.
IG Client Sentiment Index: AUD/JPY Rate Forecast (October 11, 2022) (Chart 4)
AUD/JPY: Retail trader data shows 40.38% of traders are net-long with the ratio of traders short to long at 1.48 to 1. The number of traders net-long is 2.65% lower than yesterday and 6.96% lower from last week, while the number of traders net-short is 5.65% lower than yesterday and unchanged from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/JPY prices may continue to rise.
Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed AUD/JPY trading bias.
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--- Written by Christopher Vecchio, CFA, Senior Strategist
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.