AUD/USD Forex Signal: Strongly Bearish

Adam Lemon

The action is still broadly bearish, and two support levels have been invalidated over recent hours, which are bearish signs.

Last Thursday’s AUD/USD signals were not triggered, as there was no bearish price action when the price first reached the resistance levels I had identified at 0.7651 and 0.7689 that day.

Today’s AUD/USD Signals

Risk 0.75%.

Trades must be taken prior to 5pm Tokyo time Wednesday.

Short Trade Ideas

  • Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of the bearish trend line currently sitting at about 0.7655 within the below price chart, or 0.7702.

  • Place the stop loss 1 pip above the local swing high.

  • Move the stop loss to break even once the trade is 20 pips in profit.

  • Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

Long Trade Ideas

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7555, 0.7498, or 0.7485.

  • Place the stop loss 1 pip below the local swing low.

  • Move the stop loss to break even once the trade is 20 pips in profit.

  • Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

AUD/USD Analysis

I wrote last Thursday that now that the price had cleared the consolidating triangle and associated support, it had plenty of room to fall. I thought it would continue downward over the day and reach at least 0.7555.

This was not an accurate call, as the price fell a little that day but has just traded sideways since then. The price has not yet reached 0.7555.

Despite this, I think the price is still on its way down to 0.7555 and possibly even 0.7500, and that my forecast from Thursday will be fulfilled. The action is still broadly bearish, and two support levels have been invalidated over recent hours, which are bearish signs.

Further bearish signs, and perhaps the most important ones, lie in the fact that the Australian dollar has been weakening since the RBA statement release a few hours ago. The RBA has announced an extension to its asset purchase program (bond buying) and this is clearly causing new weakness in the Australian dollar. The U.S. dollar is also seeing a bid over recent hours and has been getting stronger.

These factors all point to a continuing fall in the price of this currency pair as likely over the course of today.

The best opportunity which may set up is likely to be a short trade from a bearish reversal off the bearish trend line which is currently sitting just above 0.7650.

In the unlikely event that the price falls strongly to the support level at 0.7498, I will also be prepared to take a long trade if there is a bullish reversal there.

AUD/USD chart

There is nothing of high importance scheduled today regarding the USD. Regarding the AUD, the Governor of the RBA will be giving a minor speech at 1:30am London time.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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