Aussie Breakout Shows Signs of Exhaustion

Australian Dollar Technical Price Outlook: AUD/USD Weekly Trade Levels

• Australian Dollar technical trade level update – Weekly Chart
• AUD/USD breakout probes three-year highs as momentum signals overbought
• Aussie outlook remains constructive above 7563– key resistance into 8100

The Australian Dollar surged more than 4.9% against the US Dollar off the January lows with the rally stretching to fresh multi-year highs this week. While the broader outlook remains constructive on the heels of the recent breakout, the immediate advance may be vulnerable heading into the March open. These are the updated targets and invalidation levels that matter on the AUD/USD weekly price chart heading into the close of the month. 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 Weekly Price Outlook we noted that AUD/USD had responded to confluence uptrend resistance and to, “be on the lookout for downside exhaustion ahead of 7385 IF price is indeed heading higher with a weekly close above 7835 needed to mark resumption of the broader uptrend.” Aussie registered a low 7563 into the February open before reversing sharply higher with the advance now attempting to mark a fourth consecutive week. Note that weekly momentum is now probing multi-month highs into overbought territory and while the broader focus remains weighted to the topside, the immediate advance may be vulnerable to exhaustion into the close of the month.

Initial weekly resistance stands at the upper parallel (currently near ~8020s) backed by the 2018 high-week close / 2017 high at 8108/25 – look for a larger reaction there IF reached. Weekly support rests at 7801 backed by the objective 2021 yearly open at 7701. Ultimately, a break / close below the yearly opening-range lows at 7563 would be needed to suggest a more significant reversal is underway.

Bottom line: The Australian Dollar breakout keeps the broader focus higher in price but the advance may be vulnerable into the close of the month as weekly momentum stretches into multi-year highs. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards the upper parallel – the risk remains for a pullback within the confines of the broader uptrend. Losses should be limited to the yearly open IF price is indeed heading higher. As always, stay nimble into the close of the month. I’ll publish an updated Australian Dollar Price Outlook once we get further clarity on 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 -1.91 (34.38% of traders are long) – typically bullish reading
• Long positions are 0.81% higher than yesterday and 15.00% lower from last week
• Short positions are0.97% higher than yesterday and 0.66% 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 stronger AUD/USD-bullish contrarian trading bias from a sentiment standpoint.

—

Key Australia / US Data Releases

Economic Calendar – latest economic developments and upcoming event risk.

Previous Weekly Technical Charts

— Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex