Australian Dollar, AUD/USD, AUD/JPY, AU Jobs Report, IG Client Sentiment – Weekly Outlook
- Australian Dollar continued to feel the pressure last week
- Will a local jobs report revive some spirit for the Aussie?
- Technical and sentiment analysis seems to not bode well
The Australian Dollar extended losses against the US Dollar this past week. Despite a more-hawkish Reserve Bank of Australia at the beginning of this month, prevailing risk aversion in financial markets is weighing on the sentiment-linked currency. In the week ahead, traders should be mindful of the Australian jobs report.
On Wednesday, the country is expected to add 30k jobs in April as the unemployment rate declines to 3.9% from 4.0%. That would be the first time on record to see the figure below 4%. This could fuel more hawkish RBA policy expectations, potentially boosting the Australian currency. With that in mind, how is the technical landscaping shaping up to be for the Aussie?
AUD/USD – Bearish
Unfortunately, the Australian Dollar’s technical posture has been deteriorating, in line with weakness since April. This past week, AUD/USD confirmed a breakout under the critical 0.6968 – 0.7000 support zone. That has exposed the 0.6777 – 0.6832 range below, which are lows last seen in June 2020. Clearing the latter could pace the way for a trajectory towards the 2020 low.
Still, keep a close eye on RSI. Positive divergence seems to be prevailing, showing that downside momentum is fading. This can at times precede a turn higher. With that in mind, there could be some room for the currency to recover. The real test of a bounce would likely be the falling trendline from March on the chart below.
Getting there does entail pushing back above the 0.6968 – 0.7000 zone, which could establish itself as new resistance. Above that zone, the falling trendline could reinstate the dominant focus to the downside. Extending losses would expose the 100% and 123.6% Fibonacci extension levels at 0.6635 and 0.6486 respectively.
Australian Dollar IG Client Sentiment Analysis – Bearish
Taking a peek at IG Client Sentiment (IGCS), about 76% of retail traders were net-long AUD/USD towards the end of last week. At times, IGCS can behave as a contrarian indicator. Since the majority of investors are biased to the upside, this could spell trouble for the Aussie. This is as upside exposure increased by 7.34% and 19.98% compared to yesterday and last week respectively. With that in mind, these signals are offering a stronger bearish contrarian trading bias for AUD/USD.
*IGCS data used from May 12th report
— Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter