Aussie Dollar Encounters Bear Flag
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AUD/USD ANALYSIS & TALKING POINTS
- Macro factors favor Aussie weakness.
- AUD/USD bears eye bear flag break.
AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP
The Australian dollar has come under pressure from the US debt ceiling negotiations stirring risk aversion in financial markets as well as concerns around the China re-opening that has hampered commodity prices. From a central bank point of view, the Federal Reserve may not be done with their aggressive monetary policy while the Reserve Bank of Australia (RBA) is expected to remain on hold. These fundamental factors look to be working against the Aussie dollar short-term while market await more macro inputs.
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Chart prepared by Warren Venketas, IG
Daily AUD/USD price action shows the pair forming a short-term bear flag type chart pattern that traditionally unfolds towards the downside. A confirmation break below flag support coinciding with the 0.6500 psychological level could open up a firm move lower towards the 0.6387 swing low.
On the contrary, a break above flag resistance/0.6565 resistance handle could invalidate the pattern on potentially point to a reversal from the preceding downtrend.
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Key resistance levels:
- Flag resistance/0.6565
Key support levels:
- Flag support/0.6500
IG CLIENT SENTIMENT DATA: MIXED
IGCS shows retail traders are currently LONG on AUD/USD, with 78% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment resulting but due to recent changes in long and short positioning, we arrive at a short-term cautious disposition.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.