Australian Dollar Technical Forecast: AUD/USD, AUD/JPY Rally at Risk

[ArvinIG]

AUSTRALIAN DOLLAR TECHNICAL PRICE OUTLOOK: AUD/USD WEEKLY TRADE LEVELS

• Australian Dollar technical trade level update - Weekly Chart
• AUD/USD surges more than 3.3% off January lows- 2022 yearly open resistance in view
• Aussie resistance 7270, 7365/85 (key), 7531- Support 7129, 7066 (key), 6991-7016 (Major pivot)
• AUD/JPY resistance 83.67, 84.70 (key), 86 – Support 81.30, 80.32, 78.88-79.39 (critical)
   

The Australian Dollar is attempting to mark a third consecutive weekly advance against the US Dollar this week with AUD/USD now eyeing resistance the objective yearly open. Likewise, AUD/JPY has already failed a test of yearly open resistance with a clean yearly opening-range now intact. Is this just a recovery or is a larger reversal underway for Aussie? These are the updated targets and invalidation levels that matter on the AUD/USD & AUD/JPY weekly price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Aussie technical setup and more.

AUSTRALIAN DOLLAR PRICE CHART – AUD/USD WEEKLY

Chart Prepared by Michael Boutros, Technical Strategist; AUD/USD on Tradingview

Notes: In last month’s Australian Dollar Technical Forecast we note that, “The Australian Dollar recovery may be vulnerable while below the yearly open here. From a trading standpoint, the focus is on a break of the January range for guidance…” A decisive break below the monthly opening-range saw Aussie plunge more than 4.7% from the yearly high, back into a critical support pivot at 6991-7016- a region defined by the 2021 low, the 2018 lows, and the 2020 yearly open. The immediate focus is on this potential third-weekly rally off support- just a rebound or a larger reversal?

Yearly-open resistance stands at 7270 backed by a more significant technical confluence at the 38.2% Fibonacci retracement of the 2021 decline / 2017 May low-week close at 7365/85- note that this threshold converges on the 2021 downslope into the open of Q2 with the 52-week moving average just higher at ~7420. Weekly-open support rests at 7129 with near-term bullish invalidation set to the monthly open at 7066- losses should be limited by these levels IF price is indeed heading for a breakout.

Bottom line: The Australian Dollar recovery off key support at the 2021 lows is now approaching the objective 2022 early open- the focus is on a reaction into this zone IF reached. From a trading standpoint, a good region to reduce long-exposure / raise protective stops – losses should be limited by the monthly open with a breach / weekly close above the 52-week moving average needed to suggest a more significant low was registered last month. Review my latest Australian Dollar Price Outlook for a closer look at the near-term AUD/USD technical trade levels.

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

AUSTRALIAN DOLLAR TRADER SENTIMENT – AUD/USD PRICE CHART

• A summary of IG Client Sentiment shows traders are net-short AUD/USD - the ratio stands at -1.02 (49.45% of traders are long) – typically neutral reading
• Long positions are 6.90% lower than yesterday and 14.94% lower from last week
• Short positions are0.19% lower than yesterday and 1.85% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/USD 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 slightly stronger AUD/USD-bullish contrarian trading bias from a sentiment standpoint.
  

AUSTRALIAN DOLLAR VS JAPANESE YEN PRICE CHART - AUD/JPY WEEKLY

Chart Prepared by Michael Boutros, Technical Strategist; AUD/USD on Tradingview

Notes: A similar scenario can be seen on AUD/JPY with price now attempting to breach above its 52-week moving average at ~82.57. Monthly open support rests at 81.30 backed by the 2019 high close at 80.32- note that this level also represents the yearly opening-range lows and if broke could see a test of a more significant technical confluence at the November low-week close / 2021 yearly-open at 78.88-79.39 – look for a larger reaction there IF reached. A topside breach / close above the yearly open at 83.67 would keep the focus on the 2021 high-week close at 84.70 – a level of interest for possible topside exhaustion IF reached. We’ll touch base on this setup again soon- stay tuned.

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• Japanese Yen (USD/JPY)
• Canadian Dollar (USD/CAD)
• Gold (XAU/USD)
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• US Dollar Index (DXY)
• New Zealand Dollar (NZD/USD)
• Euro (EUR/USD)

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DISCLOSURES
Michael Boutros, Technical Currency Strategist with DailyFX
18 February 2022