Trade Closed: 2008-07-15 08:41
The greenback sold off in a big way, triggering our short order at .9735 and touching our stop not too long ago at .9835.
Total: – 100 pips/ -1.0%
Trade Idea: 2008-07-14 19:39
The Australian Dollar once again made new highs against the US Dollar, hitting around .9735. This run may be a bit overdone in the short term as the pair hits a few technical signals. Will Aussie strength continue?
This trade idea is based mostly on technicals as we see the pair forming a “rising wedge” on the Daily chart. This is usually a bearish pattern as it tends to signal a reversal, especially on declining volume. Of course, we all know that volume in the FX spot market cannot be calculated, so we turn to the CFTC Commitment of Traders report which has indicated that volume in the Australian Dollar futures have fallen in the most recent report. Also, stochastics are just about in overbought territory signaling the rally may be running out of steam.
Now, just because we’re looking mostly at technicals for our trade idea, doesn’t mean we can ignore what’s going on fundamentally. The pair has risen on renewed fears of US financial system weakness and the strength of the Australian economy. This is priced in and the market’s attention will now turn to the RBA Meeting Minutes tonight and the US PPI and Retail sales tomorrow.
This is a counter trend trade, so we should be extra careful to stick our risk management rules. Stay tuned for updates and good luck!