In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. Here are the key levels that matter on the weekly chart for the Australian Dollar (AUD/USD) heading into the close of a big week of event risk. The weekly close will be critical here as Aussie probes key resistance levels. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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AUD/USD Weekly Price Chart
Notes: In last month’s AUD/USD Weekly Technical Perspective, we noted that the Aussie rebound was targeting, “initial resistance up towards 7636– a breach there would be needed to suggest that a larger reversal is underway / a more significant low is in place. A weekly close below 7480 would mark resumption for the broader downtrend with such a scenario targeting 7327. As noted in today’s webinar, for now, I’m willing to trade the long-side targeting slope resistance.”
Aussie registered a high at 7677 before pulling back sharply to close the week below the 76-handle (note the nearly perfect tag of former channel support extending off the 2016 low / 200-week moving average). So was that the high?
The verdict is still out but topside levels to keep in mind heading into the close of the month are the measured objective at 7709 and pitchfork resistance / 52-week moving average at 7760s. Both of these levels represent areas of interest for possible exhaustion IF indeed Aussie is going to hold this formation. Key support remains at 7481 with a break / close below needed to mark resumption of the broader down trend. Broader bearish invalidation remains steady with the yearly open at 7801.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: The potential for a larger recovery remains while above the yearly low-week close at 7541 but we’re generally on the lookout for topside exhaustion on this stretch higher. From a trading standpoint, the immediate threat may still be higher for the Aussie in the days ahead but ultimately I’ll favor fading strength closer to structural resistance.
AUD/USD IG Client Positioning
- A summary of IG Client Sentiment shows traders are net-long AUD/USD- the ratio stands at +1.36 (57.6% of traders are long) – bearish reading
- Traders have remained net-long since June 5th; price has moved 1.4% lower since then
- Long positions are 3.5% higher than yesterday and 1.2% lower from last week
- Short positions are 8.7% lower than yesterday and 1.1% lower 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 more net-long than yesterday but less net-long from last week and the combination of current positioning& recent changes gives us a further mixed Aussie trading bias from a sentiment standpoint.
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Economic Calendar– for the latest economic developments and upcoming event risk
Previous Weekly Technical Perspectives
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at [email protected]