AUD/USD Technical Outlook: Aussie Holds Critical Price Support

2018-07-23 17:10:00

What's on this page

AUD/USD Daily Price Chart
AUD/USD 120min Price Chart
AUD/USD Trader Sentiment
Relevant AUD/USD Economic Data Releases
Other Setups in Play

• Aussie holds key weekly support- breach above July opening-range to validate reversal
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The Australian dollar has maintained its July opening-range just above key weekly support with a strong reversal last week threatening a larger recovery in the Aussie. Here are the updated targets and invalidation levels that matter for AUD/USD heading into the close of the month. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

AUD/USD Daily Price Chart

Technical Outlook: In my latest Weekly Technical Perspective on the Australian Dollar, we highlighted that price was approaching key support at, “7327- a level defined by the 61.8% retracement of the 2016 advance and the May 2017 swing lows. Note that the median-line of the descending pitchfork formation has continued to govern the lows on a weekly close basis and highlights the risk to the short-side here.”

Two subsequent attempts to close below this threshold have failed and keeps our focus on a break of the July opening-range for guidance with the broader short-bias still risking a larger recovery here. Daily resistance stands at 7425 with a breach / close above targeting 7491/94 backed by the 61.8% retracement / February trendline resistance at 7537.

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AUD/USD 120min Price Chart

Notes: A closer look at price action sees AUD/USD trading within the confines of a newly proposed ascending pitchfork formation extending off the monthly lows. We’re looking for near-term low at 7378 or 7634 to offer possible entries with bullish invalidation set to the low-day close at 7336.

Initial resistance stands at the monthly open / May low at 7411/12 backed closely by the 61.8% Fibonacci extension at 7425- a breach there would be needed to suggest a more significant low is in place with such a scenario targeting 7456 and 7484/94.

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Bottom line: AUD/USD is responding to long-term weekly support with our near-term focus higher in price while within this formation. From a trading standpoint, I’m looking for signs of downside exhaustion to offer favorable long-entries above 7336. A break / close below 7327 would risk resumption of the broader downtrend targeting 7230. Keep I mind event risk picks up later in the week with the Australian Consumer Price Index (CPI) and US 2Q GDP on tap.

Review Previous AUD/USD Techcnial Outlook

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

AUD/USD Trader Sentiment

A summary of IG Client Sentiment shows traders are net-long AUD/USD- the ratio stands at +1.42 (58.7% of traders are long) – weak bearishreading
Traders have remained net-long since June 5th; price has moved 1.6% lower since then
Long positions are3.3% higher than yesterday and 3.1% lower from last week
Short positions are 15.3% higher than yesterday and 15.8% higher from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long the Australian Dollar suggests 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.

See how shifts in AUD/USD retail positioning are impacting trend- Learn more about sentiment!

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