The Australian Dollar is up more than 3% the from the May / yearly lows against the dollar with price now testing confluence resistance ahead of major event risk tonight this week. Although the technical outlook leaves for further gains, the immediate advance may be vulnerable as Aussie tests initial resistance targets. Here are the levels that matter heading into June open.
AUD/USD Daily Price Chart
Technical Outlook:In our previous AUDUSD updates we noted that Aussie was, “testing BIG weekly support here (7480s) and IF price is going to rebound, this would be a good spot.” The subsequent rebound has taken the pair into initial resistance here at 7643/60 where the March low converges on the 61.8% retracement of the April sell-off (note daily RSI testing 60 for the first time February). While our medium-term outlook remains weighted to the topside, the immediate advance may be vulnerable heading into the Reserve Bank of Australia (RBA) interest rate decision later tonight.
A topside breach keeps the long-bias in play targeting the 38.2% retracement of the yearly range at 7689 backed closely by the head & shoulders measured objective at 7709– (a breach / close above would suggest a larger reversal is underway targeting 7740 & 7774). Support now rests with the monthly open at 7568 with bullish invalidation raised to the June opening-range low at 7514.
AUD/USD 240min Price Chart
Notes: A closer look at Aussie price action sees the pair trading within the confines of a near-term ascending pitchfork formation extending off the May lows. Price is testing near-term confluence resistance here with parallels further highlighting the 7689 & 7709 resistance targets.
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Bottom line: This is the first major test of resistance on the heels of last month’s reversal and may limit the topside advances near-term. That said, from a trading standpoint, look to adjust exposure here and bring in stops heading into the RBA. Initial support rests along the median-line with our near-term focus higher while above 7559 (both areas of interest for possible re-entry).
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AUD/USD IG Client Positioning
- A summary of IG Client Sentiment shows traders are net-short AUDUSD- the ratio stands at -1.01 (49.8% of traders are long) – weak bullishreading
- The percentage of traders net-long is now its lowest since Apr 12th
- Long positions are 19.5% lower than yesterday and 30.8% lower from last week
- Short positions are 34.5% higher than yesterday and 27.8% higher 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. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUDUSD-bullish contrarian trading bias from a sentiment standpoint.
Relevant Data Releases
Economic Calendar – latest economic developments and upcoming event risk
Other Setups in Play
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org