Trade Closed: 2009-07-16 12:05
Grrr! All the bearish technical signals in the world couldn’t stop the surprise positive US earnings that brought traders into a risk taking frenzy over the past couple of trading sessions. This prompted a sell off out of US Dollars into higher yielding currencies like the Australian Dollar. Needless to say, my short trade was stopped out for a loss as AUDUSD rallied to my stop at .8010 and making highs around .8060.
Total: -115 pips/ -1.0%
This was a very frustrating trade since technicals and fundamentals lined up. We’re still in a recession with no positive outlook until 2010 or 2011. In general, the earnings that came out were positive because of cost cutting and not rising growth or revenues. Doesn’t make sense, but that’s the markets and I guess investors are looking for any reason to be positive whether it is warranted or not. It’s a traders market, so stay flexible and pay attention to risk sentiment. Stay tuned!
Trade Idea: 2009-07-14 13:17
G’day Mates! There are bearish signals all over the AUDUSD pair on today’s four hour chart. Time to trade in some Australian Dollars for Greenbacks??
Again, I have the four hour chart up and it’s bearish reversal signals galore: potential resistance at the falling trendline, Fibonacci retracement levels being hit, stochastics in overbought territory, and hidden bearish divergence. It looks like the stars may be lining up for a simple bearish play on this pair.
Fundamentally, the “Land Down Under” is still thought to be in a better position for recovery as they are one of the few major economies whose GDP posted an expansion at the beginning of the year. But will that continue? The Australian economy is largely based on commodities and exports, and if we continue to see a retraction of demand for their goods and services, risk aversion could bring another round of selling to the Aussie during this retracement. Of course, this would benefit the Greenback as risk aversion has lead to the perceived safety that the US capital markets can give. I think until we see a trend shift to more positive data and a rise in demand for raw materials, this risk aversion could continue in the medium term.
So, I am going short at market for technical reasons. My stop will be around the average daily range of 125 pips, and I will target previous lows and beyond. Here’s what I am going to do:
Short AUDUSD at market (.7895), stop at .8010, pt1 at .7770, pt2 at .7645
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
Be safe and stay tuned!