AUD/USD Forex Signal: Beginning Consolidation

Adam Lemon

The Aussie weakened slightly from the dovish RBA minutes.

Last Tuesday’s AUD/USD signal produced a very profitable short trade from the bearish reversal by the inside bar which rejected the resistance level I had identified at 0.7430.

Today’s AUD/USD Signals

Risk 0.75%

Trades may only be taken prior to 5pm Tokyo time Wednesday.

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7390 or 0.7430.

  • 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 Idea

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7321 or 0.7267.

  • 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 Tuesday that a long trade generally did not look like a good idea, and that the resistance level at 0.7430 did look quite strong, so it might provide a short trade – I was prepared to go short if we get a firm reversal off that level, which we did.

The picture now shows the former large swings up and down in this currency pair beginning to narrow, with the first signs of a consolidation pattern emerging between 0.7321 and 0.7390. The Reserve Bank of Australia released the minutes of its most recent monthly meeting a few hours ago, with the key takeaway being that the RBA does not expect to raise its interest rate in 2022. This as expected has had a small dovish effect on the Aussie, but nothing really of any technical significance above a scalping kind of time frame.

If I am correct about this consolidative atmosphere, the best opportunities ahead in this currency pair will be likely to be either a long trade from a bounce at 0.7321 or a short trade from 0.7390 again. I prefer a short trade as the US Dollar is in a long-term bullish trend, meaning a short trade should be likely to have a higher chance of producing a better result.   

AUD/USD

Concerning the USD, there will be a release of US retail sales data at 1:30pm London time. There is nothing of high importance scheduled for release 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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