Aussie Weekly Price Outlook: Australian Dollar Battle Lines Drawn

In this series, we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The Aussie recovery failed at major resistance against the US Dollar last week with our focus on the near-term pullback in price. These are the updated targets and invalidation levels that matter on the AUD/USD weekly chart.

AUD/USD WEEKLY PRICE CHART

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Notes: In my latest Aussie Price Outlook we noted that “a breach / close above 6972 is needed to fuel the next leg higher targeting the yearly low-day close at 7005- look for a bigger reaction there IF reached” A brief stint into the 50% retracement of the yearly range failed post-NFPs on Friday with price closing the week below the figure.

Key weekly resistance remains at 7020/42 with a breach above the June 2018 resistance slope (currently ~7080s) needed to validate a larger turn in price. Support rests at the 61.8% retracement of the May advance (also the May 20th reversal-week close) at 6925. A downside break of this formation (currently around ~6900) would once again keep the 2016 low / low-week close into focus at 6827/55- look for a more significant reaction there IF reached.

Bottom line: Aussie turned from a major resistance confluence last week and IF prices are indeed heading higher, losses should be limited to the lower parallel. From a trading standpoint, look for a support on a move lower to offer more favorable entries with a topside breach above channel resistance needed to shift the broader focus higher. Review my latest AUD/USD Price Outlook for a closer look at the near-term Aussie trading levels.

AUD/USD TRADER SENTIMENT

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• A summary of IG Client Sentiment shows traders are net-long AUD/USD - the ratio stands at +1.84 (64.8% of traders are long) – bearish reading
• Traders have remained net-long since April 18th; price has moved 2.9% lower since then
• Long positions are 3.9% higher than yesterday and 8.0% higher from last week
• Short positions are 1.7% higher than yesterday and 14.7% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Aussie may continue to fall. Traders are further net-long than yesterday & 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.