Australian Dollar Outlook:
- AUD/JPY charges have been rejected at symmetrical triangle resistance in addition to the ascending trendline from the March 2020 and August 2021 lows.
- Similarly, AUD/USD charges have failed after trying to breakout above bullish falling wedge resistance.
- However, per the IG Client Sentiment Index, each AUD/JPY and AUD/USD charges retain bullish biases.
Risk Reversal Drags Down AUD
Both AUD/JPY and AUD/USD charges have had a powerful first two weeks to February, following ‘risk’ larger, usually talking: larger bond yields, which have harm protected haven currencies; larger fairness markets; and better commodity costs. But in the present day’s value motion is disconcerting, to say the least. Rejections at crucial resistance in each pairs means that the latest rallies could also be exhausted within the short-term.
AUD/USD RATE TECHNICAL ANALYSIS: DAILY CHART (February 2021 to February 2022) (CHART 1)
For the previous a number of weeks, AUD/USD charges have remained within the clutches of two multi-month technical patterns, the descending parallel channel in place because the finish of June in addition to the breakdown beneath the rising trendline from the March 2020 and August 2021 lows. A 3rd sample has emerged over the previous three-plus months as nicely: a possible bullish falling wedge. But in the present day’s value motion has produced a powerful reversal after reaching wedge resistance, the descending trendline from the October 2021 and January 2022 swing highs.
The pair is above their day by day 5-, 8-, 13-, and 21-EMA envelope, which is in bullish sequential order. While day by day Slow Stochastics are trending larger, they’ve but to achieve overbought territory, and whereas day by day MACD is trending larger, it stays beneath its sign line. An absence of settlement amongst momentum indicators means that AUD/USD charges might pullback earlier than one other try at cracking wedge resistance.
IG Client Sentiment Index: AUD/USD RATE Forecast (February 10, 2022) (Chart 2)
AUD/USD: Retail dealer information exhibits 51.31% of merchants are net-long with the ratio of merchants lengthy to quick at 1.05 to 1. The variety of merchants net-long is 12.51% decrease than yesterday and eight.00% decrease from final week, whereas the variety of merchants net-short is 0.41% decrease than yesterday and 13.79% larger from final week.
We usually take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests AUD/USD costs might proceed to fall.
Yet merchants are much less net-long than yesterday and in contrast with final week. Recent modifications in sentiment warn that the present AUD/USD value development might quickly reverse larger regardless of the very fact merchants stay net-long.
AUD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (February 2021 to February 2022) (CHART 3)
AUD/JPY charges stay in the midst of their year-long vary, discovering resistance at two crucial ranges in the present day: symmetrical triangle resistance from the October 2021 and January 2022 swing highs; and the ascending trendline from the March 2020 and August 2021 lows. A brief-term pullback might transpire earlier than one other try to interrupt by this confluence of resistance, which when cleared, would sign better potential for a return to 86.00.
Bullish momentum stays robust, emboldening a ‘buy the dip’ perspective. The pair is above their day by day 5-, 8-, 13-, and 21-EMA envelope, which is in bullish sequential order. Daily MACD is starting to development larger by its sign line, whereas day by day Slow Stochastics are heading into overbought territory. All issues thought-about, AUD/JPY charges have a extra interesting technical setup than AUD/USD charges, ought to a bullish decision happen.
IG Client Sentiment Index: AUD/JPY Rate Forecast (February 10, 2022) (Chart 4)
AUD/JPY: Retail dealer information exhibits 39.19% of merchants are net-long with the ratio of merchants quick to lengthy at 1.55 to 1. The variety of merchants net-long is 16.67% decrease than yesterday and 9.84% decrease from final week, whereas the variety of merchants net-short is 7.56% larger than yesterday and 25.49% larger from final week.
We usually take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests AUD/JPY costs might proceed to rise.
Traders are additional net-short than yesterday and final week, and the mix of present sentiment and up to date modifications offers us a stronger AUD/JPY-bullish contrarian buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Strategist
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