US Dollar Outlook: Will AUD/USD and NZD/USD Rise as Retail Traders Sell?

[MongiIG]

US DOLLAR, AUD/USD, NZD/USD, TECHNICAL ANALYSIS, RETAIL TRADER POSITIONING - TALKING POINTS

• Retail traders continue boosting long bets in the US Dollar
• AUD/USD and NZD/USD short positioning is on the rise
• Will this spell strength, or will dominant downtrends hold?

Looking at IG Client Sentiment (IGCS), retail traders are increasingly betting that the US Dollar may appreciate against the Australian and New Zealand Dollars. In other words, downside exposure is rising in AUD/USD and NZD/USD. At times, IGCS can function as a contrarian indicator. If this trend in positioning continues, then the Aussie and Kiwi may recover against the Greenback. For a more comprehensive overview, check out the recording of my webinar above.

AUSTRALIAN DOLLAR SENTIMENT OUTLOOK - BULLISH

The IGCS gauge shows that about 55% of retail traders are net-long AUD/USD. Since most are still biased to the upside, this suggests prices may continue falling. However, net-long bets decreased by 5.32% and 12.57% compared to yesterday and last week respectively. With that in mind, recent changes in positioning hint that the pair may soon reverse higher.

AUD/USD DAILY CHART

Despite strength since the end of January, the Australian Dollar remains in a dominant downward bias against the US Dollar. A falling zone of resistance from late September is aiding prices lower, with a potential falling trendline from early 2021 not far above that. Resuming the dominant downtrend entails clearing the 0.6968 – 0.7016 support zone, which is made up of late 2020 lows. Signs of a near-term rise could come from clearing near-term falling resistance, exposing the January high at 0.7314.

 

Chart Created in Trading View

NEW ZEALAND DOLLAR SENTIMENT OUTLOOK - BULLISH

The IGCS gauge reveals that about 52% of retail investors are net-long NZD/USD. Since most traders are still biased to the upside, this suggests prices may continue falling. However, net-long bets have decreased by 6.13% and 16.19% compared to yesterday and last week respectively. With that in mind, recent changes in positioning hint that NZD/USD may reverse higher.

NZD/USD DAILY CHART

The New Zealand Dollar also remains tilted lower against the US Dollar when looking at the broader picture. A falling zone of resistance is guiding NZD/USD lower since September. That may see prices retest the critical 0.6489 – 0.6528 support zone, which is made up of lows from the summer of 2020. Beyond the latter sits the 78.6% Fibonacci extension at 0.6449. On the other hand, clearing falling resistance exposes the 0.6859 – 0.6891 zone. The latter is made up of January peaks.

 

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from February 15th Report

--- Written by Daniel Dubrovsky, Strategist for DailyFX.com. 16th Feb 2022