The Forex market has come under increasing focus lately as stock markets consolidate and we start to see some central bank surprises and major price movements in currencies lately. Although the largest price movements have not been in the Australian or US Dollars lately, we can say that these two currencies are certainly getting attention, as the economic data and central bank stories surrounding them become more controversial and interesting. The US Dollar is always a big deal as it accounts for approximately 80% of FX traded globally, but the Australian Dollar has become more prominent in recent years, as one of the major currencies with a relatively high interest rate and a relatively strong trend.
Top Regulated Brokers
The Australian Dollar has a central bank which is under increasing hawkish pressure, mainly because of sticky inflation which the Reserve Bank of Australia sees as too high, and a recent GDP print which was also higher than expected. The high GDP print is not an open-and-shut case, it is not necessarily bullish, but it is having that impact now. Couple these factors with the relatively high interest rate of 3.75%, and you have bullish fundamentals on the Aussie.
Turning to the US Dollar, this also has strong fundamentals, with a much larger than expected US jobs number last Friday, and an expectation that the Fed will hike its interest rate at its next meeting in just a few days.
So, both currencies have strong fundamentals. Much will depend on differentials, or simply put, which central bank is under more pressure to keep things hawkish? Arguably, that is the Aussie, due mostly to the sticky inflation, despite the strong US jobs data.
AUD/USD Technical Analysis
The price chart below shows that the AUD/USD currency pair is in a bullish trend, and there is a linear regression analysis within the price chart below which shows that a symmetrical ascending price channel has held almost all the price action since the start of July. Such price channels tend to be reliable.
There is a long-term bullish trend in this currency pair – another bullish sign.
Turning to the very short term, and just looking at recent hours, we can see that the price has been consolidating above the nearest support level at 0.7188. The last hour saw the price make a minor bullish breakout to a new high.
Everything seems to print towards higher prices. The line of least resistance is clearly upwards, with the cluster of three support levels close by below the recent consolidative price action – this structure would be hard to break.
More aggressive traders might want to just enter long now on this breakout, while more conservative traders might prefer to wait for a retracement to 0.7188 and see if a bullish bounce happens there to trigger a long trade entry.
AUD/USD H1 Price Chart
Support & Resistance Levels
My previous AUD/USD signal on 31st August
Risk 0.25%.
Trades may only be entered prior to 5pm Tokyo time Tuesday.
Short Trade Idea
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7232 or $0.7275.
Put 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 1H1 time frame H1H1H1 time frame immediately upon the next touch of $0.7188, $0.7173, or $0.7161.
Put 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.
There is nothing further of high importance scheduled today concerning either the Australian Dollar or the US Dollar.
Ready to trade our daily Forex signals? Here is our list of the top Forex brokers worth checking out.