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The Australian dollar has started to rally against the greenback as the US dollar index pulls back and a bearish death cross start to emerge on the daily price chart for the buck.
Yesterday, the AUDUSD pair moved higher after the Australian Monthly Consumer Price Index indicator for the month of November came in at 7.3% year on year versus prior 6.9%.
Also, Australia’s retail sales jumped 1.4% m/m in Nov, and Oct was revised up from -0.2% to +0.4%. This was a strong result, but weaker than growth in Nov 2020 +6.1% month on month and +6.4% month on month.
Going forward, the technicals look very bullish for the AUDUSD pair and it possible that we could soon see the Australian dollar breaking above the 0.7000 handle against the US dollar.
Sentiment is also alluding to more gains ahead aswell as the crowd is starting to become far too bullish.
According to the ActivTrader market sentiment tool some 59 percent of traders are bullish towards the AUDUSD pair. As we typically look to fade sentiment biases, this could mean the AUDUSD pair could continue to reverse lower.
It is worth mentioning that high levels of bullish sentiment suggest a classic contrarian sentiment trade is still in the making, so do be careful buying this pair at current level, especially as we trade around the 0.6900 area.
AUDUSD Short-Term Technical Analysis
The four-hour time frame shows that a large head and shoulders type pattern has recently been invalidated. Typically this is a good sign for bulls, as these are strong reversal signs.
If the pattern is correct then a move back to the 0.71500 to region seems plausible. If a strong breakout takes hold, then a rally towards 0.7000 resistance level might start to take place.
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AUDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair looks to be trading to the upside after steaming through a falling trendline This type of trendline breaks are typically considered to be one of the most reliable bullish signs.
According to technical analysis we could see more a pending technical retest of 0.7150 to 0.7200. Selling a restest of the 0.7000 level area also appears another risky strategy for the bears.
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