Australian Dollar Outlook:
- AUD/JPY charges are edging in the direction of bull flag resistance, which has been in place because the center of June.
- AUD/USD charges established a morning star candlestick sample in current days, however there was no comply with via immediately.
- According to theIG Client Sentiment Index, AUD/JPY charges have a bearish bias whereas AUD/USD charges have a blended bias.
Still Telling Different Stories
In our prior replace, it was famous that “AUD/USD rates’ downside – and the weakness seen by the Aussie elsewhere – suggests that AUD/JPY rates’ recent consolidation is likely to continue.” Not a lot has modified over the previous week, however current worth motion means that the panorama could also be on the precipice of a significant shift.
AUD/USD charges are down barely on the day, however solely after establishing a morning star candlestick sample over the prior three days – a backside sample. Meanwhile, AUD/JPY charges are slowly grinding increased in the direction of multi-month bull flag resistance. In each circumstances, the potential exists for bullish alternatives within the two main AUD-crosses.
AUD/USD RATE TECHNICAL ANALYSIS: DAILY CHART (August 2021 to August 2022) (CHART 1)
Last week it was famous that “a move back to the August low at 0.6869 is in focus.” While that transpired in current days, AUD/USD charges’ fortunes could also be altering. There might not have been comply with via to the upside immediately, however the morning star candlestick sample carved out over the prior three days speaks to bottoming potential in AUD/USD charges. A transfer above the day by day 5-, 8-, 13-, and 21-EMA envelope, which stays in bearish sequential order, would clear the primary impediment for extra bullish alternatives forward.
IG Client Sentiment Index: AUD/USD RATE Forecast (August 24, 2022) (Chart 2)
AUD/USD: Retail dealer information reveals 66.05% of merchants are net-long with the ratio of merchants lengthy to brief at 1.95 to 1. The variety of merchants net-long is 0.23% increased than yesterday and 5.31% increased from final week, whereas the variety of merchants net-short is 3.28% increased than yesterday and 0.91% increased from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests AUD/USD costs might proceed to fall.
Positioning is much less net-long than yesterday however extra net-long from final week. The mixture of present sentiment and up to date modifications provides us an extra blended AUD/USD buying and selling bias.
AUD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (August 2021 to August 2022) (CHART 3)
Not a lot has modified over the previous week. It stays the case that “AUD/JPY rates are in a familiar area, continuing to trade around the 61.8% Fibonacci extension of the March 2020 low/May 2021 high/August 2021 range at 92.92 and the 76.4% Fibonacci retracement of the 2013 high/2020 low range at 94.68. More broadly, the pair remains within the bull flag that’s been carved out since mid-June.”
What has modified, nonetheless, is that momentum is popping extra bullish. AUD/JPY charges are buying and selling above their day by day 5-, 8-, 13-, and 21-EMA envelope, which is in bullish sequential order. Daily MACD is trending increased above its sign line, whereas day by day Slow Stochastics have moved again into overbought territory. A breakout from the bull flag would counsel an preliminary transfer increased to the yearly highs at 96.88 within the near-term.
IG Client Sentiment Index: AUD/JPY Rate Forecast (August 24, 2022) (Chart 4)
AUD/JPY: Retail dealer information reveals 29.26% of merchants are net-long with the ratio of merchants brief to lengthy at 2.42 to 1. The variety of merchants net-long is 23.01% increased than yesterday and 24.11% increased from final week, whereas the variety of merchants net-short is 2.89% decrease than yesterday and three.45% decrease from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests AUD/JPY costs might proceed to rise.
Yet merchants are much less net-short than yesterday and in contrast with final week. Recent modifications in sentiment warn that the present AUD/JPY worth development might quickly reverse decrease regardless of the very fact merchants stay net-short.
— Written by Christopher Vecchio, CFA, Senior Strategist