AUD/USD Forex Signal: Strong Bullish Bounce

Adam Lemon

The pair remains a key barometer of risk sentiment.

Last Tuesday’s AUD/USD signal was not triggered as none of the key support and resistance levels which I had identified were reached that day.

Today’s AUD/USD Signals

Risk 0.75%

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

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7205 or 0.7271.

  • 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

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7070 or 0.7061.

  • 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 it looked likely that there was enough bearish momentum to keep the price moving downwards over the course of the day, however I also thought that the two clustered support levels around 0.7150 looked somewhat likely to hold up if reached.

The price moved little over the course of Tuesday, but the directional bias was slightly bearish. The price has fallen since then, so my call was on the right track.

A few hours ago, we got a release of Australian GDP data which although recessionary, was better than had been expected, with the Australian economy contracting slower than generally had been thought. However, this had little impact on the price, which was hugely overshadowed by Jerome Powell’s comments at the US Federal Reserve, suggesting tapering might come earlier than had been expected. This produced a big risk-off swing which sent the price down to a new 1-year low, before the market swung back hard as the price here made a big bullish bounce off the support level at 0.7070.

The price got back to highs at around 0.7175 before starting to fall again, with short-term momentum again turning bearish.

There is volatility in the market and this pair as a key risk barometer is likely to be in focus and see large price swings. The problem is that the market is waiting for news on the likely effect of the omicron coronavirus variant, and until that happens, we are likely to see big swings up and down. If you must trade before more clarity emerges, the best approach will probably be just to trade the turning swings using a shorter time frame for entry and a higher time frame for direction. This currency pair is now suitable for this kind of short-term trading.

AUD/USD

Concerning the USD, there will be a release of the ADP Non-Farm Employment ADP Forecast at 1:30pm London time, followed by the Chair of the Federal Reserve’s testimony before the House of Representatives and ISM Manufacturiong PMI data at 3pm.

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

Did you like what you read? Let us know what you think!

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

0 User comments

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Read more
Add new comment
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.