AUD/USD in Freefall as US Yields Vault to New Heights

AUD/USD OUTLOOK

• AUD/USD sinks to its lowest level since November 2022 as U.S. yields vault to fresh multi-year highs.
• This article looks at key technical levels worth watching in the coming days.
• IG client sentiment data points to further weakness for the Aussie.

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AUD/USD TECHNICAL ANALYSIS

AUD/USD fell sharply and sank to its lowest level in nearly a year on Tuesday, weighed down by soaring U.S. rates and risk-off sentiment on Wall Street. By way of context, bond yields vaulted to fresh multi-year highs during the U.S. trading session after better-than-expected U.S. labor market data (JOLTS) strengthened the case for further Fed tightening and higher interest rates for longer.

In terms of technical analysis, AUD/USD accelerated its descent and headed towards the psychological 0.6300 mark after breaching support at 0.6350 earlier in the day. With sellers firmly in control of the market, it may be a matter of time before we see an attack on 0.6275. While prices are likely to establish a base in this area, a breakdown could open the door to a retest of last year’s lows.

In the event that AUD/USD turns around and begins to recover, initial resistance is located near the 0.6350 region. Successfully piloting above this key ceiling could lure new buyers into the market, rekindling upward momentum and setting the stage for a possible move toward 0.6460. On further strength, the bulls may become emboldened to launch an assault on the 0.6500 handle.

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AUD/USD TECHNICAL CHART

AUD/USD Chart Prepared Using TradingView

AUD/USD MARKET SENTIMENT

Sentiment data from IG shows that 84.57% of traders are net-long, with the bullish-to-bearish ratio standing at 5.48 to 1 at the time of writing. The tally of clients who are net long has risen by 18.19% since yesterday and by 7.42% over the previous week. Meanwhile, the number of traders net-short is down 22.28% from the previous session and 22.14% from seven days ago.

Taking a contrary stance on crowd sentiment, the growing bullish positions on AUD/USD, in comparison to both yesterday’s tally and the levels witnessed last week, signal the potential for continued weakness in the currency pair.

Discover the power of crowd mentality. Download our free sentiment guide to decipher how shifts in AUD/USD’s positioning can act as key indicators for upcoming price movements.

Source: IG Client Sentiment Data