Australian Dollar Analysis and Talking Points
- AUD/USD | Warning of a Top
- IG Client Sentiment Signals AUD May Continue to Fall
AUD/USD Warning of a Top
AUD/USD: Having rejected the 0.80 handle in late February, warnings of a top have increased of late with the pair showing a head and shoulders pattern, which has been well documented, while momentum signals continue to lean on the bearish side. Despite briefly breaking below, the neckline at 0.7562 remains the key area to watch. A firm close below this level is likely to confirm that the pair has topped out and thus open the doors to the 0.7423 (23.6% Fib of Mar 20 low to Feb 21 peak). On the topside, rallies have been curbed by resistance at 0.7660-0.7675, which also coincides with the 100DMA, although, should the pair close above this level, the 50DMA at 0.7713 will be in focus.
AUD/USD Chart: Daily Time Frame
Source: Refinitiv
Given that the Aussie has struggled against the greenback despite risk sentiment remaining somewhat buoyant, I am biased to the downside for the pair. Going forward, there is little interest throughout today’s session, thus the focus will shift towards next week’s US inflation data, whereby the headline is expected to jump to 2.4%. That said, while central banks across the globe are expecting a spike in inflation due in part base effects, there is one thing expecting it and another thing seeing it, therefore, volatility is likely to pick up ahead of the release.
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IG Client Sentiment: AUD/USD
Trader data shows 51.39% of traders are net-long with the ratio of traders long to short at 1.06 to 1. The number of traders net-long is 5.93% lower than yesterday and 7.47% higher from last week, while the number of traders net-short is 5.03% higher than yesterday and 6.07% higher 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.
Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed AUD/USD trading bias.
Source: DailyFX, IG
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