For the week ended November 5th, the CFTC Positioning Report, otherwise known as the Commitment of Traders (COT) reports a reduction in the net short positions on the British Pound. Speculators reduced their gross short positions on the GBP to 6 month lows, as odds for a no-deal Brexit dropped. Speculations on a sweeping Tory win in December’s elections are also helping to push back short positions, as investors change sentiment on the GBP.
The positive headlines from the US-China trade front have helped to bolster risk-on sentiment in the market, which has affected the safe haven assets of the JPY and CHF. Net short positions on the JPY have climbed back to 5-month highs, as the US-China Phase one agreement looks set to be signed shortly.
There has also been an uptick in the long positions on the AUD, as a less-than-dovish statement from the Reserve Bank of Australia (RBA) as well as optimism around the US-China trade war helped bolster the upside sentiment on the Aussie Dollar.
Technical Outlook for AUDUSD
The COT report highlights the AUDUSD, which continues to hold long-term upside potential on the RBA’s “wait-and-see” approach to monetary policy as announced last week. The weekly chart features a potential double bottom pattern which is still in evolution as recent attempts by price to break the neckline were unsuccessful. There is a descending trendline which connects the highs of price action from December 12, 2018 till date. This line intersects the neckline of the potential double bottom, producing a critical price level which must be breached for upside potential to be realized.
A successful break of the neckline could target the 23.6% Fibonacci multi-week highs of 0.70188, as well as previous lows found at various times in the 4th quarter of 2018, now acting in role reversal. 0.72346 (38.2% Fibonacci level) could also be a target if the upside momentum is strong enough.
On the flip side, 0.67462 and 0.6688 (previous support close to the lows of August to October 2019) will serve as the next potential downside targets if the neckline remains unbroken.