The Australian Dollar has rallied nearly 2% off the yearly lows with prices now eyeing initial resistance hurdles. While the broader outlook does remain constructive, near-term the risk for a pullback in price has us looking for a possible exhaustion pullback to offer more favorable opportunities.

AUD/USD DAILY PRICE CHART

Technical Outlook: Earlier this month we highlighted a critical weekly support confluence in AUDUSD with while noting that, “the immediate short-bias is at risk heading into 7612/37 and from a trading standpoint I’ll be looking for evidence of a near-term low in this range.” Price registered a low at 7643 before rebounding with the advance now targeting initial resistance targets at 7793 (100-day moving average) & 7812/15where the 61.8% retracement converges on slope resistance and the 200-day moving average.

Note that price is poised to post and outside-day reversal into these resistance targets and while the broader outlook remains weighted to the topside the move does warn of possible near-term exhaustion. Monthly open support rests at 7690 with our broader bullish invalidation steady at 7637/45. A topside breach above basic slope resistance targets a rally towards 7876/89 (March high-day close & 50% retracement).

AUD/USD 240MIN PRICE CHART

Notes: A closer look at price action sees AUDUSD trading within the confines of an ascending pitchfork formation with prices reversing off the upper parallel last week. Aussie found support at the median-line today and the focus is on another possible exhaustion stretch into 7812 where the 61.8% retracement converges on the February trendline resistance. Ultimately a breach above 7831 would be needed to suggest a more significant low is in place with such a scenario targeting 7889. Interim support rest at 7746backed by 7726 with bullish invalidation now raised to 7706.

Bottom line: Aussie rebounded at critical weekly support last month and while our broader outlook remains weighted to the topside, the advance is at risk near-term as price approaches structural resistance around the 78-handle. From a trading standpoint, I’ll be looking for near-term exhaustion to offer a pullback in price- ultimately, we’ll favor buying a larger set-back towards near-term structural support targeting a breach above the February trendline. Keep in mind we get the release of Australian employment data later tonight.

AUD/USD IG CLIENT POSITIONING

• A summary of IG Client Sentiment shows traders are net-long AUDUSD- the ratio stands at +1.06 (51.4% of traders are long) – extremely weak bearish reading
• Long positions are 0.9% higher than yesterday and 5.5% higher from last week
• Short positions are 2.8% lower than yesterday and 0.5% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUDUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUDUSD-bearish contrarian trading bias from a sentiment standpoint.