Jump to content

Market update: Australian dollar soars as traders turn bearish

Recommended Posts

Australian dollar gains most since end of July and retail traders started unwinding bullish bets.


original-size.webpSource: Bloomberg


Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Thursday 24 August 2023

AUD/USD sentiment outlook: bullish

In response to the Australian dollar soaring against the US dollar, retail traders have started to slowly decrease their upside exposure. This can be seen by looking at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, could the Aussie be looking to extend recent gains?

The IGCS gauge shows that about 78% of retail traders still remain net-long AUD/USD. Since the vast majority are biased to the upside, this remains to offer a warning that the exchange rate may fall down the road. However, downside exposure has increased by 16.67% and 34.11% compared to yesterday and last week, respectively.

AUD/USD IG client sentiment chart


original-size.webpSource: DailyFX

AUD/USD technical analysis

Taking a look at the daily chart, AUD/USD has extended gains after failing to breach the 78.6% Fibonacci retracement level of 0.6382. Now, the exchange rate has closed above the 31 May low of 0.6459. From here, immediate resistance is the 20-day moving average, followed by the 50-day line. A bearish 'Death Cross' between the two lines remains in play.

It would likely take a confirmatory breakout above the 20-day line to offer a stronger bullish technical conviction. As such, recent gains ought to be treated with a pinch of salt. Confirming a breakout below 0.6382 opens the door to extending the prevailing downtrend since the middle of July.

Australian dollar daily chart


original-size.webpSource: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Create New...