Australian Dollar Outlook:
- AUD/JPY charges proceed to consolidate in a possible bull flag, which has been in place because the center of June.
- On the opposite hand, AUD/USD charges misplaced their latest uptrend, suggesting a retest of the August low will not be far-off.
- According to the IG Client Sentiment Index, AUD/JPY charges have a bullish bias whereas AUD/USD charges have a bearish bias.
Telling Different Stories
There doesn’t seem like a constant theme creating throughout the AUD-crosses. On one hand, a look at AUD/JPY charges means that the Australian Dollar is within the midst of a consolidation that will in the end yield a push to new highs. On the opposite hand, AUD/USD charges are exhibiting indicators of sudden weak point, down almost -3% from their month-to-month excessive set final week.
Given what’s transpiring elsewhere – in AUD/NZD, EUR/AUD, and GBP/AUD charges – it seems that AUD/JPY charges’ relative energy is deceptive. After all, Japanese Yen weak point has been pronounced in latest days, thanks partially to rising sovereign bond yields and resilient world equity markets. Beyond the Yen, base steel costs (copper, iron ore, nickel) have softened amid progress considerations out of China, Australia’s largest buying and selling companion.
AUD/USD charges’ draw back – and the weak point seen by the Aussie elsewhere – means that AUD/JPY charges’ latest consolidation is prone to proceed.
AUD/USD RATE TECHNICAL ANALYSIS: DAILY CHART (August 2021 to August 2022) (CHART 1)
The rally out of the broad downtrend in place because the February 2021 excessive could have ended, as AUD/USD charges are within the technique of breaking the uptrend from the July and early-August swing lows. Momentum is popping bearish, with the pair beneath its day by day 5-, 8-, 13-, and 21-EMA envelope, which is in neither bearish nor bullish sequential order. Daily MACD has issued a bearish crossover albeit above its sign line, whereas day by day Slow Stochastics have plunged out of overbought territory in latest days. A transfer again to the August low at 0.6869 is in focus.
IG Client Sentiment Index: AUD/USD RATE Forecast (August 17, 2022) (Chart 2)
AUD/USD: Retail dealer information reveals 65.09% of merchants are net-long with the ratio of merchants lengthy to quick at 1.86 to 1. The variety of merchants net-long is 9.39% increased than yesterday and 38.82% increased from final week, whereas the variety of merchants net-short is 20.96% decrease than yesterday and 32.37% decrease from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests AUD/USD costs could proceed to fall.
Traders are additional net-long than yesterday and final week, and the mix of present sentiment and up to date adjustments provides us a stronger AUD/USD-bearish contrarian buying and selling bias.
AUD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (August 2021 to August 2022) (CHART 3)
AUD/JPY charges are in a well-recognized space, persevering with to trade across the 61.8% Fibonacci extension of the March 2020 low/May 2021 excessive/August 2021 vary at 92.92 and the 76.4% Fibonacci retracement of the 2013 excessive/2020 low vary at 94.68. More broadly, the pair stays inside the bull flag that’s been carved out since mid-June.
Momentum is missing. The pair is pinned at its day by day 5-, 8-, 13-, and 21-EMA envelope, which is in neither bearish nor bullish sequential order. Daily MACD is above its sign line however flat, whereas day by day Slow Stochastics are turning decrease after failing to succeed in overbought territory. While the bull flag suggests a continuation transfer to contemporary yearly highs, the contextual efficiency of different AUD-crosses means that extra consolidation is the possible path ahead within the near-term.
IG Client Sentiment Index: AUD/JPY Rate Forecast (August 17, 2022) (Chart 4)
AUD/JPY: Retail dealer information reveals 24.35% of merchants are net-long with the ratio of merchants quick to lengthy at 3.11 to 1. The variety of merchants net-long is 5.88% decrease than yesterday and 17.04% decrease from final week, whereas the variety of merchants net-short is 13.73% increased than yesterday and 11.90% increased from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests AUD/JPY costs could proceed to rise.
Traders are additional net-short than yesterday and final week, and the mix of present sentiment and up to date adjustments provides us a stronger AUD/JPY-bullish contrarian buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Strategist