BUZZ-COMMENT-AUD/USD shorts face risks of a short squeeze

Jan 16 (Reuters) - AUD/USD traded near flat Thursday after erasing earlier losses and technicals and positioning suggest shorts could get squeezed hard.

Recent U.S. pricing data helped ease investors concerns inflation is rising too fast and that the Fed may actually consider hiking rates. U.S. yields US10YT=RR, US2YT=RR slid away from recent highs which weighed on the U.S. dollar.

AUD/USD rallied away from the recently made 4-1/2-year low and above the 10- and 21-day moving averages.

That rally occurred after AUD/USD neared the 76.4% Fibonacci retracement of the 0.5510-0.8007 rally. That retracement level often is a retracement where existing trends reverse direction.

Adding to bullish technical signals are January's monthly doji, diverging monthly RSI and potential head and shoulders bottom on daily charts.

Positioning reinforces risk of a short squeeze. CFTC data indicates net-short positions increased to their largest since May 2024.

Should AUD/USD fail to make downside progress soon investors positioned short may begin covering which could rally AUD/USD.

China Q4 GDP, December industrial output and retail sales reports are due in Asia.

Upbeat reports could underpin riskier assets. USD/CNH, which AUD/USD is a proxy for, could fall and commodities DCIOc2, HGv1 may rally on improved economic growth in China.

AUD/USD short covering could lead to a test of resistance in the 0.6430/70 area.

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(Christopher Romano is a Reuters market analyst. The views expressed are his own)

((christopher.romano@thomsonreuters.com;))