Last Tuesday’s AUD/USD signal produced a losing short trade entry from the bearish rejection of the resistance level I identified at 0.7505.
Today’s AUD/USD Signals
Risk 0.75%
Trades must be taken prior to 5pm Tokyo time Friday.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7505, 0.7524, 0.7548, or 0.7569.
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
Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7437, 0.7408, or 0.7366.
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 we had strong bullish momentum with the price rising to a multi-week high, but we also had ahead near the big round number at 0.7500 a cluster of resistance levels. This suggested that the bullish move would probably run out of steam in this area, so there could be a short trade opportunity here later especially at 0.7505.
In a way this was a bad call as after initially rejecting 0.7505, the price then turned around and continued its strong rise until just a few hours ago when it bounced off the resistance level at 0.7548.
Although we have a bit of a bearish retracement going on over the short-term, it is right to zoom out and look at the wider environment. We have seen “risk” assets – stocks, Bitcoin, WTI Crude Oil, for example – race ahead to reach or get close to record highs. In this environment, the Australian dollar as a key “risk” currency is likely to be strong and to bounce back later. For this reason, I will keep looking for long trades in this currency pair although the USD is not very weak so it is not the ideal vehicle to use to trade the strong Aussie – trading the AUD/JPY cross long may produce better results.
The difficulty in trading long here is that the USD is prone to sudden inflows which can push the price down rapidly, and there are no obvious key support levels until 0.7437 is reached. This is unlikely to be hit today so it probably will be hard to find a good trade opportunity here over the coming hours.
Concerning the AUD, the Governor of the RBA will be speaking at 8pm London time. There is nothing of high importance scheduled regarding the USD.