Key AUD / USD levels to watch out for amid breakout warning

Australian dollar Analysis and discussion topics

• AUD / USD | Summit warning
• IG customer opinion AUD Signals: Fall May Continue

AUD / USD Top Alert

AUD / USD: After the rejection of the 0.80 level in late February, the top warnings have intensified recently: the pair is showing a well-documented head and shoulders pattern, while impulse signals continue to rely on the bearish side. Despite a short break below, the neckline at 0.7562 remains a key area to watch. A solid close below this level is likely to confirm that the pair has peaked and thus open doors to 0.7423 (23.6% Fibonacci from March 20 low to February 21 high). On the other hand, the rally is constrained by the resistance at 0.7660-0.7675, which also coincides with the 100DMA, although if the pair closes above that level, the focus will be on the 50DMA at 0.7713.

AUD / USD Chart: daily time frame

Source: Refinitiv

Given that the Aussie was struggling with the dollar, despite the fact that risk sentiment remained quite high, I am inclined towards the pair’s decline. Going forward, interest in today’s session will be low, so attention will be shifted to next week’s US inflation data, which expects the headline to jump to 2.4%. That said, while central banks around the world expect inflation to spike in part because of the underlying effect, one is expecting it and the other is expecting it, so volatility is likely to rise ahead of publication.

IG Clients Mood: AUD / USD

Trader data shows that 51.39% of traders are net long with a long to short ratio of 1.06: 1. The number of net long traders is 5.93% lower than yesterday and 7.47% higher than last week, while the number of net-short traders is 5.03% higher than yesterday and 6.07% higher than last week.

We usually take the opposite view of crowd sentiment, and the fact that traders are net long suggests that the AUD / USD price may continue to fall.

Positioning is less net long than yesterday, but cleaner long than last week. The combination of current sentiment and recent changes gives us another mixed bias in AUD / USD trading.

Source: DailyFX, IG