AUD/USD Forex Signal: Consolidation Above 0.7750

Adam Lemon

The Australian dollar as a risk-on barometer has been seriously weakened by the falls we are seeing in global stock markets over recent days.

Last Tuesday’s AUD/USD signals may have produced a losing short trade from the bearish price action at 0.7804.

Today’s AUD/USD Signals

Risk 0.75%.

Trades must be entered prior to 5pm Tokyo time Friday.

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7811, 0.7839, or 0.7884.

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

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

  • Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7739 or 0.7697.

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

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

  • Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

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 Tuesday that the best approach here would be looking to take a long trade, especially on a short time frame, from any bullish bounce at 0.7700, but I would not be content to take a fully bullish bias here until the price got established above 0.7800, which looked likely to be the day’s pivotal point. A failure at the resistance level there could alternatively provide an attractive opportunity to enter a short trade.

The price did not make it back down to 0.7700 on Tuesday after the signal was released, but I was right that the price would rise at least a little after getting established above 0.7800 over the rest of the day – but not by much. In subsequent days, the price took a deeper dip, and is now back to where it was on Tuesday.

The technical picture is one of consolidation between 0.7750 and 0.7839.

The Australian dollar as a risk-on barometer has been seriously weakened by the falls we are seeing in global stock markets over recent days. The correlation, though, seems to have fallen a bit, as the Australian economy has shown it is doing better than expected, with annualized GDP growth now running at a healthy 3.1%.

The Forex market generally, except the USD/JPY currency pair, is ranging on quite low volatility, meaning it is not a particularly exciting time to be trading Forex. However, these ranging conditions can be exploited by identifying key support and resistance levels accurately and being prepared to trade reversals from these levels either long or short, provided such trades are managed on short time frames.

I am ready to take a long trade from a bullish bounce at 0.7739 or a short trade from a bearish bounce at 0.7839.

AUD/USD chart

Concerning the USD, the chair of the Federal Reserve will be speaking about the U.S. economy at 5:05pm London time. There is nothing of high importance due today regarding the AUD.

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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