Australian dollar may rise as AUD/USD upside exposure fades
The Australian dollar may extend its breakout against the US Dollar above a 2013 trend line as retail investors’ upside exposure in AUD/USD dwindles.
Australian dollar, AUD/USD IG client sentiment: talking points
- The Australian dollar may rise as long bets decline
- AUD/USD breakout above 2013 trend line in focus
- What are technical levels to watch for if prices fall?
AUD/USD IG client sentiment outlook
The Australian dollar could be readying to extend its rise against the US dollar since earlier this year based on signals from IG client sentiment (IGCS). In late March, IGCS implied that about 60% of retail investors were net long AUD/USD. Since then, that decreased to just above a 25% upside bias in late August. During this time, the Australian dollar advanced over 25%.
IGCS is typically a contrarian indicator. On 2 September, about 35% of retail traders were net long AUD/USD. Exposure to the upside declined by almost 11% and 7% over a daily and weekly basis respectively. From here, the combination of current sentiment and recent changes offers a stronger bullish contrarian trading bias in AUD/USD.
What are other factors that can influence price action in foreign exchange markets?
AUD/USD client positioning
Australian dollar technical analysis
From a technical standpoint, the AUD/USD-bullish outlook is underscored by the pair’s breakout above long-term falling resistance from the end of 2013. The weekly chart shows that while the breakout has been confirmed, prices got caught within highs from December 2018, establishing a key level of resistance as prices consolidated. A push higher exposes the December 2017 low on the way towards peaks from June 2018.
AUD/USD weekly chart
Focusing on the daily chart, guiding the Australian dollar higher has been the short-term 20-day simple moving average (SMA). While a close under it could raise the risk of a reversal, the medium-term 50-day SMA may reinstate the focus to the upside. Otherwise, the $0.7064-$0.7015 inflection range could be critical to watch for follow-through. Further losses would place the focus on the $0.684-$0.6777 support zone from early June.
AUD/USD daily chart
Publication date :
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Explore the markets with our free course
Discover the range of markets you can trade CFDs on - and learn how they work - with IG Academy's online course.
Turn knowledge into success
Practice makes perfect. Take what you’ve learned in this forex strategy article, and try it out risk-free in your demo account.
Ready to trade forex?
Put the lessons in this article to use in a live account. Upgrading is quick and simple.
- Trade over 80 major and niche currency pairs
- Protect your capital with risk management tools
- Analyse and deal seamlessly on smart, fast charts
Inspired to trade?
Put the knowledge you’ve gained from this article into practice. Log in to your account now.