Photo - Andreas Zanin
Andreas Zanin
Analysis | July 16, 2021

Outlook and Forecast: AUD/USD

We have been bearish of the AUD in recent posts and it’s moved to the downside and we expect more weakness – We view the Aussie as sell-on rallies back to resistance or on a break of support. Our view of the Fundamentals, sentiment, and technicals below.

Fundamentals

The AUD is a proxy risk on risk-off currency but despite risk on in the markets with stock markets hitting multi-year highs and firm commodity prices, the Aussie has moved lower which indicates the goods news priced discounted.

We expect risk-off and the global reflation trade to fade. Speculators are heavily long commodities and expect a big break lower as the USD firms up.

 

The most important commodity for Australia is Iron Ore accounting for nearly 50% of export revenue which has seen a huge price rise and is the biggest bubble in the commodity sector in our view. We expect the bubble to burst and take out the large number of speculators who are long on stop to levels of support indicated below.

The AUD has been weak recently and we think a big breakdown in commodity prices and iron ore will weigh on the AUD. We see little upside as it can’t show strength against what is normally a bullish backdrop for it the good news is priced in and the risk to reward in AUD shorts is good.

Technical Analysis

On the weekly chart, we have a long-term target of the big supply and demand level at 70.00. On the daily chart, our view is to sell a break below 0.7400 or sell a rally back to first level resistance at 0.7500 with a stop back from the big 0.7600 level.

 

Research provided by LearnCurrencyTradingOnline.com

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