AUD/USD Technical Analysis: Aussie Dollar Bottom Taking Shape?

AUD/USD TECHNICAL OUTLOOK: BEARISH

• Australian Dollar struggling for near-term follow-through after rebound
• Bullish Morning Star candlestick pattern still warns of possible bottoming
• Sentiment studies hint at bearish bias, but signs of a turn may be showing

The Australian Dollar recovered some lost ground after hitting a four-month low against its US counterpart, as expected. The move higher is struggling to sustain momentum on a test of immediate support-turned-resistance at 0.6755 but the formation of a bullish Morning Star candlestick pattern warns that a larger rebound may yet be in the cards.

A daily close above 0.6755 exposes trendline resistance guiding the down move since the beginning of the year, now at 0.6802. Such a move might neutralize near-term selling pressure and set the stage for a retest of the underside of the recently broken trendline underpinning the rise from October lows. Critical support remains in the 0.6671-90 area, with a break below that setting the stage to challenge the 0.65 mark.

AUD/USD daily chart created with TradingView

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AUD/USD TRADER SENTIMENT

Retail trader data shows 71.76% of traders are net-long with the ratio of traders long to short at 2.54 to 1. The number of traders net-long is 10.96% lower than yesterday and 9.44% lower from last week, while the number of traders net-short is 15.49% higher than yesterday and 26.36% higher from last week.

IG Client Sentiment(IGCS) is typically used as a contrarian indicator, and the fact traders are net-long suggests AUD/USD prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/USD price trend may soon reverse higher

See the full IGCS sentiment report here.

AUD/USD TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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