AUD/USD Retracement Play: Gazillionth Time’s the Charm? – Trade Closed

Oh no, not another heartbreak! How many chances do I have to give AUD/USD before I actually win a trade? Here’s what happened to my latest attempt at trading the Aussie.

My trade started out pretty well after it got triggered. Many of our trader friends suspect that a pullback was only natural after the huge selloff in high-yielding assets early this week, so I didn’t panic much when AUD/USD reached my entry at 1.0650 and lingered there for most of the London session.

AUD/USD Stopped Out

Unfortunately, the Fed’s Big Ben shocked the markets with his speech yesterday, and no, it wasn’t because his beard was whiter than ever. Apparently, he not only said that economic growth was weaker than the Fed had originally thought, but he also hinted at more economic stimulus in the future! Eep! And I thought watching the very last Harry Potter movie was already sad enough!

In any case, Bernanke’s news was enough to get the dollar bears busy as they drove the dollar sharply lower against the high-yielding comdolls. I got stopped out even when I was watching the trade closely! Maybe my fingers just weren’t fast enough.

Though my happy vibes are taking a huge hit from both the losing trade and the prospect of saying au revoir to Harry Potter, I still give happy snaps at the way I and some of my Facebook friends took the risky trade. After all, there was a really good technical setup, which, at the time, was also supported by fundamentals.

How could I have improved on this trade though? Do you think I’ll be able to score a win with AUD/USD soon?

Don’t hesitate to join my friends sharing their thoughts through the comments below or even on one of my Comdoll Corners!

See ya there!

Happy time

Trade Idea: 2011-07-13 7:22

Even though I took a small hit on my last AUD/USD trade, I’m giving this pair one more shot. Everyone deserves another chance, right?

Risk still seems to be off in the markets as we saw plenty of red figures on the economic calendar yesterday. Although most of the weak reports came from the U.K. and the U.S., Australia had its own share of poor data as its NAB business confidence index slipped from 6 to 0 in June.

Fresh off the press today is the Westpac consumer sentiment index, which showed that individuals grew more pessimistic about their economy. Why the long faces, Aussies? That can’t be good for the Australian economy!

This is why I decided to maintain my bearish bias on the Aussie. Aside from that, I also noticed that gold is inching really close to its previous highs, which could act as resistance. With that gold-AUD correlation that I learned from the School of Pipsology, I’m thinking the Aussie could also fall back if the resistance on gold holds.

AUD/USD Retracement

As for the technicals, AUD/USD itself also approached a nice resistance level around 1.0650. This coincides with the 50% Fibonacci retracement level and also a former support level from the past couple of weeks. Oh, and it’s forming a nice bearish divergence on the 1-hour chart, too!

I’m also seeing a sort of rising wedge, which is usually leads to a downside breakout. If that happens, I’ll be aiming for the previous lows around the 1.0550 level. I set my stop at 1.0750, which is a hundred pips away from my short order at 1.0650.

In short, here are the trade details:

Short AUD/USD at 1.0650, stop loss at 1.0750, profit target at 1.0550. I’ll be risking only 0.5% of my account on this trade. Pretty simple, huh?

If you wanna jump in the same trade, better watch out for Fed head Bernanke’s speech during the U.S. session. I’ll be keeping my eyes glued to the tube around 2:00 pm GMT to see whether he’ll talk about the possibility of QE3.

If he admits that the Fed needs to dole out more stimulus for the U.S. economy, I just might close my trade early knowing how this could lead to a strong U.S. dollar selloff. But if he merely points out the weaknesses in the U.S. economy and remains mum about QE3 (or dismisses that possibility entirely), I’ll be holding on to my short AUD/USD trade and praying that risk aversion will do its magic.

Speaking of magic, are you all ready for Harry Potter: The Deathly Hallows Part II? I hear that the “end of an era” craze is making kids and adults alike look forward to the movie like it’s Christmas!

Anyway, what do you think of my trade? Will I succeed in my gazillionth attempt to trade AUD/USD? Don’t be afraid to share your two cents! Whether it’s a trade idea, an opinion, or even a Harry Potter fangirl/fanboy comment, I will greatly appreciate it!

You can give me a shoutout on the box below, my Twitter or Facebook accounts, or even one of my Comdoll Corners I made just for you! Meanwhile, I gotta find my nephews some really cool-looking Harry Potter costume. They’re really excited about the movie!

Looking forward to hearing your thoughts!

Happy time

  • Dean FX Paul

    I believe you will succeed this time!! 🙂 Well it was down today anyhow.. and there doesn’t look like too much saving news in the short-term. On the other hand, as people were saying today “Why the bounce?”..

    • happypip

      Boo hoo, I probably should’ve just exited my trade before Bernanke’s speech. I was up by a few pips then 🙁

  • Newguy

    The underlying theme seems risk adversion versus alternatives to the US Dollar.  Fresh hints from the US Fed about QE3 and the US buget battle are making me not “longing” for the Dollar.

    • happypip

      Yep, it does look like the U.S. dollar just lost its safe-haven appeal even though risk aversion is still around. I probably should’ve “longed” for the other safe-havens, like CHF or JPY, instead.

  • Me7062a

    I thought it would work out, too. I was short on the 4-hour chart’s bearish divergence, but got stopped out when Bernanke put QE3 back on the table.

    • happypip

      *Sigh* The market is just full of surprises, isn’t it?

  • ambtax1

    I saw the exact same set up 🙂 Babypips has taught me well. I still need a grasp on the fundamentals though. Bernanke speaks and the markets shoots it seems…

  • Kgabest

    I see on the 4 hour chart, this is a 3Ed wave up.

    • happypip

      Yikes, I’m not an expert on wave analysis. I really should start learning that so I wouldn’t get wiped out on moves like this. Did you catch the wave up?

  • Foricks

    What’s the definition of insanity again?  This one hurt because it seemed like such a sure thing.  I even waited until the 62% before jumping in.  Lesson learned was to pay more attention when Helecopter Ben opens his pie-hole (like again, today).  Now surely, the aussies will want to take some of those profits off of the table when they end their week this evening, right?  Am I insane to want to jump in again?

    • happypip

      Haha, Helicopter Ben. You’re jumping in a short trade? Maybe for a day trade that doesn’t sound so insane at all. But I think I’ll be bearish on the US dollar on the longer-term 🙂 Nice hearing from you again, Foricks! 

      • Foricks

        missed my retrace of 1.0630 (ask) by .00005 pips, but closed it at 1.0645.  Takes some of the sting out of missing the fundies.  I too will be more bearish on the USD, but as I recall last year, that didn’t take off until August.  I am currently waiting for a seasonal dip in Gold/Silver that has yet to materialize.  This is why I am playing the dollar favorably.  Thanks for the insight.  From the size of the string here, many of us were with you on this trade.  Cheers and have a good weekend.

      • brygivrob

        jim rogers is long the dollar, may go up for about  6 months; esp since euo in so much trouble

  • Clertor

    Hello ComDolls,
    I’m going to make a few suggestions. I hope they help. I have been reading your blog for a while. One thing that I find interesting is that you look at pairs in a very personal way. Probably because you use a lot of fundamentals for your trades. I don’t, I just look to see if there are any news in the horizon and base my decision using TA.
    I guess what I mean is it doesn’t matter how many times you loss a trade in this particular pair, each trade is more of an individual entity from the emotional point of view.
    On this trade in particular I noticed 2 things. One is that price broke the wedge that you draw to the upside and you took the trade anyway. That was a red light in my book. The second thing is that I would have waited out until you had confirmation of the bounce at the 50% Fib going down or in this case at the 61.8%, because there is always the possibility that it will go there.
    The third thing (i know I said two, but I just remembered, 🙂 Why put the stop so high?
    According to Fib trading, if your reversal passes the 61.8% its a different trade setup all togheter. By putting the stop clser to that level, you can afford losing a few pips on the way down, but making sure of the direction.
    I don’t know if I’m clear enough. Anyway, I hope you find this helpful.

    • happypip

      Very insightful and helpful tips, Clertor!

      I guess I’ve been so used to placing wide stops that I failed to consider the invalidity of the Fib resistance on this one.

      Also, as much as it makes me cringe to admit it, I have been getting personal on my trades. I guess it’s also because I’ve been watching the comdoll pairs so closely that I feel a bit disappointed when the markets throw a fundamental surprise that invalidates our setups.

      Don’t worry, I’ll work on these on my next trades! Thanks again for the help! 😀

  • Steve44McaUSA

    Hey there Happy.  Keep up the work.  I agree with Clertor words.  Good advise. I trade AUS/USD and AUD/JPY pais a lot also watchen that Gold.  Been watching the fundementals more lately,. thinking I was missing out on something.  The more I look, It seems the TA tells most of the story and the charts do what they do,  with a reaction and the standard correction.    Those Stop Losses back to back to back are hard to take.    Keep that smile on….

  • brygivrob

    Looked like a good trade, but I would’ve had a must tighter stop loss.

  • brygivrob

    It is often good to use the low (or high) of the most previous bar/s as a point that must be broken for entry on a short (or long). You are not getting in early, but price movement is confirming a downward (or upward) direction. If you don’t wait for some type of confirmation then you are getting in too early. (Something at which I am an expert.)

    You can also switch to a shorter time frame chart to look for your confirmation. Might be a good idea to scale in: accumulate your position in halves or thirds.

    Broken trend lines will help a lot too.

    Many, many traders avoid trading when the Bernank speaks, or other big news releases.