False Break Higher to Mark Top?


AUD/USD TECHNICAL OUTLOOK: BEARISH

  • Australian Dollar reverses upside range break, signals topping
  • Key support just above 0.62, break may clear path below 0.60
  • Trader sentiment studies warn positioning favors gains for now

The Australian Dollar failed to find follow-through on a break above range resistance at 0.6570. Prices promptly reversed course and retreated back under the level. Furthermore, the appearance of a bearish Evening Star candlestick pattern coupled with negative RSI divergence suggests that this ‘false breakout’ may evolve into the formation of a broader top.

Immediate range support is at 0.6373. A break below that confirmed on a daily closing basis seems likely to open the door for another test of the 0.6214-54 inflection zone. Extending lower beyond that appears to unlock the path below the 0.60 figure. Alternatively, a turn back higher faces the first layer of substantial resistance in the 0.6671-90 region, a former support level dating back to early August 2019.

Australian Dollar vs US Dollar price chart - daily

AUD/USD daily chart created with TradingView

Starts in:

Live now:

May 26

( 02:05 GMT )

Recommended by Ilya Spivak

AUD/USD Trading Preparation for the Week Ahead

Register for webinar

Join now

Webinar has ended

AUD/USD TRADER SENTIMENT

IG Client Sentiment (IGCS) retail sentiment data shows 67.06% of traders are net-short, with the short-to-long ratio at 2.04 to 1. This is typically used as a contrarian indicator, so traders being net-short suggests AUD/USD is biased upward.

In fact, the net-short tilt has grown compared with yesterday and a week before, which seemingly bolsters the case for gains. However, the size of the positioning mismatch is approaching levels where sentiment extremes have often occurred previously, warning that a ‘flip’ may not be far away.

Australian Dollar vs US Dollar price, trader sentiment

See the full IGCS sentiment report here.

How to Use IG Client Sentiment in Your Trading

How to Use IG Client Sentiment in Your Trading

Recommended by Ilya Spivak

Improve your trading with IG Client Sentiment Data

FX TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter





Source link



Leave a Reply

error: Content is protected !!