Nick Nasad
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AUD/USD: With Well Defined Range, Let's Wait for Breakout

The AUD/USD, after sliding precipitately during much of November has entered a sideways consolidation stage over the previous 2 weeks. 

  • This sideways action continued today, as the pair came close to tagging its support level near 0.8830, after which it rallied to resistance in the range around 0.8950.
  • With these 2 levels defining the sideways channel, we should be looking for a break to either side depending on how risk sentiment/macro data shake out next.
  • Market participants are very short the Aussie according to the COT report, and so if the pair starts rallying there could be the potential for a short squeeze.
  • Some positive data from the Australian and probably more importantly the Chinese economies would help the bullish case, while weak data from those 2 probably means another downswing is in the offering.
  • Again, with such clear level in the range, its bets to see which way the pair breaks out and work from there.
  • I've missed several times trying to play a short-term reversal in this pair, but can still make a slightly bullish case because of the long-term picture in the pair. However, if the pair fails to break and hold above resistance, then there is no bullish attempt.