Aussie Dollar Selloff Set to Resume?

AUD/USD TECHNICAL OUTLOOK: BEARISH

Australian Dollar digesting losses after hitting nearly 18-year low
4-hour chart hints sellers may be ready to resume the downtrend
Trader sentiment studies warn bearish confirmation still needed

The Australian Dollar is digesting losses after dropping to support at 0.5567, the 100% Fibonacci expansion. Breaking below this barrier on a daily closing basis probably opens the door for a challenge of the October 2000 – August 2002 congestion region in the 0.5185-0.5292 zone.

AUD/USD daily chart created with TradingView

Zooming in to the 4-hour chart for a sense of near-term positioning, it looks like the AUD/USD selloff may be preparing to resume. Prices put in a Bearish Engulfing candlestick pattern at Fib resistance and slipped below the rising countertrend line guiding a tepid upswing from the March 18 low.

A break below the 23.6% expansion at 0.5708 may serve as confirmation, taking out the immediate range floor as well as former resistance at a falling trend line set from the beginning of the month and now recast as support. A challenge of the 0.5506-36 zone likely follows thereafter.

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Mar 31

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AUD/USD TRADER SENTIMENT

Retail sentiment data shows 59.54% of traders are net-long, with the long-to-short ratio at 1.47 to 1. IG Client Sentiment (IGCS) is typically used as a contrarian indicator, so traders being net-long suggests AUD/USD may continue to fall.

However, the number of traders net-long is 19.72% lower from last week while the net-short exposure is up 63.67% over the same period. This undermines conviction in the bearish bias implied in overall positioning, making for a clouded outlook.

See the full IGCS sentiment report here.