Forex Trade Idea: AUD/USD Short

With the FOMC finally behind us, it’s time for me to get back on my normal trading routine, starting with my forex watchlist pair: AUD/USD.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

AUD/USD 4-Hour Forex Chart

AUD/USD 4-Hour Forex Chart

I pointed out earlier in the week that there was a very nice technical setup on AUD/USD forming–potential resistance at the 200 SMA and Fibs–but I wanted to wait until after today’s the FOMC meeting.  Well, the reaction to the “no action” by the Fed kinda tells me that sellers are in control and don’t look to go anywhere as the market spiked higher to .7275 before being quickly faded back to my target short area.

With this behavior, I’m confident that the odds are in my favor for a profitable trade, especially since I think the Fed’s inaction is a sign that global growth risks are real, and that we could return to the kind of “risk off” behavior that favors the Greenback over the Aussie.  My stop will be a wide one of over the weekly ATR incase this decisions elevates volatility further, and my target is the previous swing low and beyond for a nice R:R.  Here’s what I’m doing:

Short half position AUD/USD at market (.7170), max stop at .7370, initial target at .6900

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.35:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!