Pick of the Day: AUD/USD – Trade Closed

Trade Update: 2007-01-17 23:30:00

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As per trade rules, we closed out this position at 5:00 pm EST for a loss of -16 pips. Good thing we closed it out too as the Greenback soon began to see weakness against most of the major pairs.

Total: -16 pips

Trade Update: 2007-01-17 09:35:00

Our trade was triggered this morning as AUDUSD retraced as expected. US data came out this morning with the headline PPI number higher than expected at 0.9% and the core number slightly higher at 0.2%. The TIC data came out at a net $68.4 billion. Pretty good number, but way lower than the forecasts at roughly $82.5 billion. Also, the index of industrial production came out higher than expected at 0.4%.

So we see slightly mixed numbers out this morning in which the market pretty much yawned at. For our trade, I will look to hold as oil and gold continues to trade lower, and it looks like the markets will continue to be a snoozer as traders hold for the US CPI report. Stay tuned for updates!

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Trade Idea

Trader sentiment has been all about the Greenback as of late….and why shouldn’t it be? With hedge funds unwinding oil positions and commodities selling off, where are traders going to put their money? Gold has been a hedge against rising oil and inflation, so not there. Stocks and the USD are looking pretty good right now. Since we are currency traders we’ll look to jump into current dollar strength….but at a good price!

Because of the Australian dollar’s strong correlation to precious metals and commodities, we will look to short the Aussie and go long the dollar. But after witnessing strength in the Greenback today, I’d like to see a retracement before jumping in the the pair.

Technically, AUD/USD is trading near the 38% Fibonacci retracement line, which was created using the swing high and low on the daily chart from 0.7080 to 0.7761. Also, stochastics are approaching overbought territory, so we will wait for the pair to move up a little further before shorting. Here’s a trade idea:

Short AUD/USD at 0.7850, stop at 0.7890, pt1 at 0.7820, pt2 at 0.7800

Remember to never risk more that 1% of your account on any single trade, so please adjust your position sizes accordingly.

Also, we do have event risk with a slew of US reports later today starting at 8:30 am EST. Stay tuned for trade adjustments before then. Good luck and good trading!

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