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Andreas Zanin
Analysis | September 28, 2021

AUD Weekly Forecast

We have been bearish of the Aussie in our posts since June and we have seen a big fall but we are now oversold so could the AUD mount a rally? Our view of the fundamenals, Sentiment and Technicals below:

AUD Correlation with China

Iron ore Australia’s biggest export iron ore has seen a big decline and China Australia’s biggest export market is slowing up as we can see on the charts below.

Nordea points out a few potentially bullish factors. Evergrande/China slowdown worries are getting priced in and Australia’s terms of trade are holding up well. Also  summer is coming which means the virus temperature delta factor will come into play.

Speculative Positioning at a Bearish Extreme

The main reason to be bullish though is the AUD is the most hated currency in the world according to IMM data (almost net short of -40% of open interest). On the chart below we can see that speculators have sold the AUD hard but commercial hedgers have built up a major long position we have extreme divergence between the two groups which points to a short-covering rally.

In terms of AUD/USD, traders can look for a potential short-covering rally, and also many crosses look attractive and the one we really like is AUD/NZD.

Speculative positioning in AUD/NZD pair is even more extreme than in AUD/USD and we think its an attractive risk to reward buy. The key technical levels to watch in both pairs below:

Technical Analysis.

In terms of AUD/USD we view it a buy on a break of resistance at 0.7300 for a potential move to 0.7500. If we however break nearby support we would view it as a buy back through the level with a stop behind chart lows.

AUD/NZD has broken out to the upside and we are looking for a move up to 1.0500 with a possible run on up to 1.0600 as the AUD corrects its oversold condition.

 

Research provided by LearnCurrencyTradingOnline.com

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