AUD/USD in Peril as Sentiment Data Signals Weakness

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AUD/USD SENTIMENT ANALYSIS

Sentiment data from IG shows that 86.20% of traders are net long, with the bullish-to-bearish ratio standing at 6:25 to 1 at the time of writing. The tally of clients who are net long has increased by 15.15% since yesterday and by 8.53% over the previous week, while the number of net-short traders has decreased by 27.36% compared to the previous session and by 20.28% from the preceding week.

Taking a contrarian view of crowd sentiment, the heightened bullish positions on AUD/USD indicate the potential for further declines in the pair. It’s crucial to note that traders remain more net-long than they were both yesterday and in the previous week. Taking these aspects into account, the current positioning, combined with recent sentiment shifts, suggests a robust contrarian trading bias favoring a bearish outlook for AUD/USD.

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Source: IG Client Sentiment Data

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AUD/USD TECHNICAL ANALYSIS

AUD/USD experienced a notable pullback on Tuesday, dragged lower by disappointing economic data from China, which had a cascading effect and put downward pressure on riskier currencies. Following this retracement, the currency pair momentarily established a new low for the year but was unable to decisively breach the critical support zone in the vicinity of 0.6360.

In the days ahead, it is imperative for traders to closely monitor the 0.6360 area, as a breakdown could potentially trigger a selloff toward 0.6275. On further weakness, the possibility of a revisit of the 2022 lows near 0.6170 should not be ruled out.

On the flip side, if the bulls regain control of the market and initiate a bullish reversal, the first resistance to consider appears near the psychological 0.6500 threshold. Upside clearance of this barrier could catalyze additional buying interest, paving the way for a rally toward 0.6600.

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AUD/USD TECHNICAL CHART

AUD/USD Chart Created Using TradingView