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Australian Dollar Forecast: AUD/USD Grinds into Downtrend Resistance

 The Australian dollar is down just 0.53%against the US Dollar in October despite a monthly range of quite 3% with AUD/USD rebounding off critical support last week. A critical price range is focused heading into the close of the month and we’re trying to find the break for guidance. These are the updated targets and invalidation levels that matter on the AUD/USD price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Aussie setup and more.

Technical Outlook: In my last Australian dollar Price Outlook we noted to get on the lookout, “for topside exhaustion before the September channel resistance with an opportunity below 7073/84 needed for an additional challenge at key yearly open support.” Aussie plummeted into the 2020/2019 yearly opens at 7016/42 last week before rebounding sharply with the recovery stalling just before the October open at 7161 – we’re trying to find an opportunity of this key range for guidance within the days ahead.

A topside breach / close above this channel is required to shift the broader focus higher again towards the 61.8% Fibonacci retracement of the September decline at 7256. an in depth below 7016 is required to mark resumption with such a scenario exposing initial daily support objectives atthe 23.6% retracement of the yearly range at 6963.

Notes: a better check out Aussie price action shows AUD/USD trading within the confines of a descending pitchfork formationextending off the monthly highs with a rebound off the lower parallel last week failing at the 61.8% retracement of the October range at 7158 - note the monthly open / channel resistance just higher at ~7165. search for inflection there IF reached with the immediate recovery vulnerable while below.

Initial support rests at the Friday low at 7101 backed by the 61.8% retracement of the near-term recent rally at 7073. Critical support steady at 7016/42 – an opportunity / close below would suggest a bigger correction is underway with initial objectives eyed at the 1.618% ext at 6987 and 6963.

Bottom line: Australian dollar is carving the weekly opening-range slightly below the monthly open / downtrend resistance – look to the breakout for guidance. From a trading standpoint, the danger remains for a deeper setback / topside exhaustion while below the September trendline with an opportunity below yearly-open support needed to mark resumption. Ultimately, a topside breach / close above the October open would be needed to stay the near-term recovery viable. Review my latest Australian dollar Weekly Price Outlook for a better check out the longer-term AUD/USD technical trade levels

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

A summary of IG Client Sentiment shows traders are net-short AUD/USD - the ratio stands at -1.20 (45.38% of traders are long) – weak bullish reading

Long positions are 5.69% above yesterday and 21.33% lower from last week

Short positions are18.12% above yesterday and 5.06% higher from last week

We typically take a contrarian view to crowd sentiment, and therefore the fact traders are net-short suggests AUD/USD prices may still rise. Traders are further net-short than yesterday and last week, and therefore the combination of current positioning and up to date changes gives us a stronger AUD/USD-bullish contrarian trading bias from a sentiment standpoint.