AUD/USD Forex Signal: Rebounding from 18-Month Low

Adam Lemon

The 0.6926 is holding as support.

My last signal on 3rd May produced a nicely profitable long trade from the bullish rejection of the support level I had identified at 0.7082.

Today’s AUD/USD Signals

Risk 0.75%

Trades must be taken before 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 0.6996, 0.7030, or 0.7059.
  • 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 0.6926 or 0.6885.
  • 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 in my previous piece on this currency pair on 3rd May that it seemed clear that the support level at 0.7082 was going to be the day’s pivotal point. I thought that if 0.7082 held as support, we would probably see the price rise over the short term. This was the good call and could have been used as the basis for a profitable day or swing trade.

The price has moved quite strongly lower over the past week, as risk-off sentiment accelerates, and the US Dollar continues to advance to new long-term highs. The Australian Dollar tends to function as a risk barometer, falling when risk-off sentiment increases. Yesterday’s strong risk-off move pushed the price down to a long-term low not seen in 18 months below the key support level at 0.6926. However, the price has rebounded from there in recent hours. Despite this rebound, there is still a lot of bearish weight likely here, and I see the next key development to watch for now as whether the big round number at 0.7000 will hold as resistance, or will the price get established above it. The 0.7000 level could be a very attractive area for new short trades to enter the market.

I will be happy to enter a short trade from a bearish reversal at 0.6996 especially if 0.7000 is rejected. I will still take short setups from the two higher resistance levels identified above, but with less confidence and so a smaller position size.

AUD/USD

There is nothing of high importance scheduled today regarding the AUD or the USD.

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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