The Australian Dollar is poised to mark the largest single week decline against the US Dollar since April after turning form critical downtrend resistance this week. These are the updated targets and invalidation levels that matter on the AUD/USD weekly price chart heading into the close of the month. Review my latestWeekly Strategy Webinar for an in-depth breakdown of this Aussie trade setup and more.
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Aussie Price Chart – AUD/USD Weekly
Notes:In my last AUD/USD Weekly Price Outlook we noted that Aussie was, “trading just below a critical pivot zone we’ve been tracking for months now at 7020/42.” Price tested this threshold for nearly five weeks before breaking down sharply with the decline now probing below the monthly opening-range low / yearly low-week close at 6911/24.
A close below this level would leave the risk for further losses into the close of the month with such a scenario targeting the lower parallel (near ~6880s) – critical support steady at the 2016 low / low-week close at 6827/55. Look for a larger reaction there IF reached – any lower would expose the yearly swing low at 6745. Key resistance remains at 7020/42 with a breach / above confluence resistance at the 61.8% retracement / slope resistance at 7118 needed to suggest a larger trend reversal is underway.
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Bottom line:Aussie reversed from confluence downtrend resistance last week and leaves AUD/USD at risk for steeper losses. From at trading standpoint, look to reduce short exposure / lower protective stops on a move into channel support. Numerous technical factors on related price action in the USD majors casts doubt on the validity of this breakdown and ultimately, we’ll be on the lookout for possible downside exhaustion ahead of the yearly lows for guidance. I’ll publish an updated AUD/USD scalp setup once we get further clarity on near-term Aussie price action.
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Aussie Trader Sentiment – AUD/USD
- A summary of IG Client Sentiment shows traders are net-long AUD/USD – the ratio stands at a staggering +1.94 (65.9% of traders are long) – bearish reading
- Traders have remained net-long since July 19; price has moved 1.9% lower since then
- The percentage of traders net-long is now its highest since June 21st
- Long positions are 5.7% higher than yesterday and 31.2% higher from last week
- Short positions are 21.9% lower than yesterday and 33.4% 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. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUD/USD-bearish contrarian trading bias from a sentiment standpoint.
See how shifts in Aussie retail positioning are impacting trend- Learn more about sentiment!
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Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
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