AUD/USD Sell-Off Approaching Key Support Hurdle

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AUD/USD Daily Chart

Technical Outlook: Aussie broke below the June trendline support last week with a break below the monthly opening range low today keeping the focus lower heading into the close of the week. That said, the decline is now approaching initial targets at the 7875/83 support confluence. Note that this median-line has served as a clear pivot in price since the start of the year- look for a reaction. Interim resistance stands at 7963 with a breach above 8054 needed to mark resumption of the broader uptrend.

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AUD/USD 240min

Notes:A closer look at price action highlights AUDUSD trading within the confines of a descending pitchfork formation extending off the highs. Note that the median-line further highlights near-term support here into 7875/83. A close below this threshold keeps the focus lower targeting 7820/30 & 7804 – both areas of interest for exhaustion / long entries.

A breach above the weekly opening-range highs at 7973 shifts the focus back towards the upper parallel around 8050 backed by 8081/88. From a trading standpoint, the immediate risk does remain lower, but I’m looking for signs of exhaustion. Bottom line: if you’re short, this is a good spot to lighten the load and lower stops. If you aren’t already short, look for a move lower or a clear reversal pattern to offer favorable long entries.

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  • A summary of IG Client Sentimentshows traders are net-short AUDUSD- the ratio stands at -2.11 (32.2% of traders are long) – bullishreading
  • Retail has been net-short since Jun 4th; price has moved 7.2% higher since then
  • Long positions are 2.6% lower than yesterday and 21.6% lower from last week
  • Short positions are 4.0% lower than yesterday and 2.9% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUDUSD prices may continue to rise. However, retail is less net-short than yesterday but more net-short from last week and the combination of current positioning& recent changes gives us a further mixed AUDUSD trading bias from a sentiment standpoint.

See how shifts in AUD/USD retail positioning are impacting trend- Click here to learn more about sentiment!

Relevant Data Releases

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— Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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