Australian Dollar Technical Analysis: AUD/JPY, AUD/USD Rate Outlook

Australian Dollar Outlook:

  • AUD/JPY rates hit their highest level since June 2015, keeping a “buy the dip” mindset intact.
  • AUD/USD rates have been weaker for the past few days, but today’s bounce off former resistance turned support suggests more gains are ahead.
  • According to IG Customer Opinion IndexAUD/JPY has a bearish bias while AUD/USD has a neutral bias.

Aussie still well positioned

Improved risk appetite in global financial markets, albeit modestly, is helping the Australian dollar rally after several days of relatively weaker trading results. Base metal prices are back on the upswing, and with volatility metrics waning, U.S. equity markets have started to rally from their monthly lows despite weaker results from some notable tech companies. And with the Reserve Bank of Australia yet to raise rates – but should do so fairly quickly once the federal election is over next month – the best days may yet be ahead for the Australian dollar.

AUD/USD RATE TECHNICAL ANALYSIS: DAILY CHART (February 2021 to April 2022) (CHART 1)

AUD/USD rates had fallen more than -4% from their monthly high to their low this week before the rally in the last two days. But after returning to former resistance in two multi-month technical patterns – the descending parallel channel in place since late June 2021 and the descending trendline from the February 2021 and May 2021 highs – AUD/USD rates rebounded in a significative way. With former resistance now supported and AUD/USD rates back above their daily 21-EMA, it stands to reason that the April low has been found. The first upside target is the 76.4% Fibonacci retracement of the 2018 high/2020 low range at 0.7502.

IG Customer Confidence Index: AUD/USD Rate Forecast (April 20, 2022) (Chart 2)

Australian Dollar Technical Analysis: AUD/JPY, AUD/USD Rate Outlook

AUD/USD: Retail trader data shows 55.17% of traders are net long with a ratio of long to short traders of 1.23 to 1. The number of net long traders is 1.85% lower than yesterday’s and 7.61% higher than last week, while the number of net-short traders is 3.98% higher than yesterday and 7.91% lower than last week .

We generally take a contrarian view of crowd sentiment, and the fact that traders are net buyers suggests that AUD/USD prices may continue lower.

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

AUD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (December 2020 to April 2022) (CHART 3)

Australian Dollar Technical Analysis: AUD/JPY, AUD/USD Rate Outlook

Unlike their counterpart AUD/USD, AUD/JPY rates did not experience a setback in April thanks to the continued weakness of the Japanese yen. Reaching a new high in 2022 and their highest level since June 2015, AUD/JPY rates maintain a bullish technical stance that warrants a buy mentality for the foreseeable future. Jhe the pair remains above its daily envelope of 5, 8, 13 and 21-EMA, which is in full bullish sequential order. The daily MACD is above its signal line and is about to issue a new bullish cross, while the daily Slow Stochastic has slipped back into overbought territory. The next significant level higher is the May 2015 high at 97.03.

IG Customer Confidence Index: AUD/JPY Rate Forecast (April 20, 2022) (Chart 4)

Australian Dollar Technical Analysis: AUD/JPY, AUD/USD Rate Outlook

AUD/JPY: Retail trader data shows 33.79% of traders are net long with a ratio of short to long traders of 1.96 to 1. The number of traders net long is 19.88% higher than yesterday’s and 39.16% higher than last week, while the number of net-short traders is unchanged from yesterday and 3.94% lower than last week.

We generally take a contrarian view of crowd sentiment, and the fact that traders are net-short suggests that AUD/JPY prices may continue higher.

Still, traders are less net-short than yesterday and compared to last week. Recent sentiment shifts warn that the current AUD/JPY price trend may soon reverse lower despite traders remaining net short.

— Written by Christopher Vecchio, CFA, Senior Strategist

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