AUD/USD – Trade Closed

Trade Closed: 2008-07-15 08:41

Aww shucks!! AUD/USD broke to new highs once again on a broad US Dollar sell off as traders speculate Fed Chairman Bernanke will testify that credit-market losses are hurting economic growth.

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%

So, we’re in a panic sell off mode and it looks like the US Dollar is heading lower, possibly hitting parity with the Australian Dollar in the near future.

Trade Idea: 2008-07-14 19:39

comdollsff

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.

With event risk up ahead, I’d like to set my orders for a better price to account for the potential volatility.

Short AUD/USD at .9735, stop at .9835, pt1 at .9635, pt2 at .9550

Remember to never risk more than 1% of your account on any single trade. Adjust position sizes accordingly.

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!

  • icei

    hi happypips, RBA just released their meeting minutes and according to RBA

    the RBA warned the June quarter inflation number, published on July 23, would remain high and the country’s bolstered terms of trade could prompt a renewed spike in Australia’s national income levels

    and the pair seems rallying on this news … do you think the pair will still be down base on this?

    thanks

  • pakiestra

    I would agree, dollar sellers are testing FED’s patience now all across the boards (EUR/USD is flirting with 1.6000 levels, GBP/USD sliced through 2.0000) plus RBA from yesterday -all in all Aussie has a good momentum now and the stops may trigger any time soon.

  • icei

    hi happypips, RBA just released their meeting minutes and according to RBA

    the RBA warned the June quarter inflation number, published on July 23, would remain high and the country’s bolstered terms of trade could prompt a renewed spike in Australia’s national income levels

    and the pair seems rallying on this news … do you think the pair will still be down base on this?

    thanks

  • pakiestra

    The order just hit the S/L. Today’s downside momentum in dollar is quite an impressive one.

  • icei

    it hit the stop lost … game over now …. DJIA futures is now falling apart

  • pakiestra

    I would agree, dollar sellers are testing FED’s patience now all across the boards (EUR/USD is flirting with 1.6000 levels, GBP/USD sliced through 2.0000) plus RBA from yesterday -all in all Aussie has a good momentum now and the stops may trigger any time soon.

  • pakiestra

    The order just hit the S/L. Today’s downside momentum in dollar is quite an impressive one.

  • icei

    it hit the stop lost … game over now …. DJIA futures is now falling apart

  • RomanDG

    ok, I am a wise ass now, but pretty much the same as with your trading idea in the eurchf, it was against the trend.

    I now retracement could also be a nice trade, but in a nutshell: why shorting audusd while it is uptrending?

  • happypip

    Thanks for the comments everyone… to answer your question RomanDG: I was getting technical signals of a possible short term reversal, so I took a calculated risk, limited my exposure… and lost. I played contrarian and the market let me know i was wrong. Today is not your average trading day as we saw a panic sell off in the US Dollar even as the US Government took action to stave off renewed fears of a financial crisis. Who would’ve know the markets would have totally disregarded Paulson and Bernanke? I didn’t. Their proposed plan was US Dollar bullish (kinda like when the Fed saved Bearn Sterns), but it didn’t happen…. I hope this clarifies my thoughts for you RomanDG…

  • RomanDG

    ok, I am a wise ass now, but pretty much the same as with your trading idea in the eurchf, it was against the trend.

    I now retracement could also be a nice trade, but in a nutshell: why shorting audusd while it is uptrending?

  • happypip

    Thanks for the comments everyone… to answer your question RomanDG: I was getting technical signals of a possible short term reversal, so I took a calculated risk, limited my exposure… and lost. I played contrarian and the market let me know i was wrong. Today is not your average trading day as we saw a panic sell off in the US Dollar even as the US Government took action to stave off renewed fears of a financial crisis. Who would’ve know the markets would have totally disregarded Paulson and Bernanke? I didn’t. Their proposed plan was US Dollar bullish (kinda like when the Fed saved Bearn Sterns), but it didn’t happen…. I hope this clarifies my thoughts for you RomanDG…