AUD/USD Short: Head and Shoulders Forming? – Closed Early

Trade Update: 07-07-2011
Boo hoo! Just when I thought AUD/USD was gonna go for a breakout, the Australian employment data comes in much better than expected. Good thing my fingers were fast enough and I was able to exit immediately.

Unfortunately, I still ended up with a teeny dent on my account as the spreads widened during the release. It’s no biggie, but it’s still a 0.25% hit!

And I thought I was going for the win this one when I heard that China just recently hiked their interest rates AGAIN. *sniff* This was certainly negative for the Aussie because more tightening in China, one of Australia’s main trade partners, could put a drag on growth in the Land Down Under. Because of that, I decided to just hold on to my trade until the Australian jobs report.

AUD/USD 1-hour Chart

Lo and behold! The actual employment change figure came in much better than expected, printing a 23,400 increase in hiring which was more than the projected 15,200 rise. Naturally, traders reacted to this news and bought up the Aussie even though the previous month’s figure suffered a huge downward revision from a positive 7.8K reading to a 0.5K DECREASE. Now that can’t be good!

Still, I decided to stick with my trade plan and close early because of the stronger than expected Australian report. I was able to close at 1.0740, which translated to a 0.25% loss on my account.

How could I have played this trade better? Do you think I should’ve just moved my stop loss to my entry point right before the release so I could’ve ended up with no loss at all?

Don’t be afraid to share a thought or two with us! You can always drop a comment on the boxes below, or even hit me up on my @Happy_pip Twitter and Playing with Comdolls Facebook page.

Thanks for the thoughts,
Happy time

Trade Idea: 07-06-2011
Hey guys, looks like we’re in risk aversion mode this week. I’m shorting AUD/USD! Who’s with me?

Fundamentally, I have three main reasons for shorting the Aussie. First is the general risk aversion brought about by more bad news from the euro region. Moody’s downgrade of Portuguese debt sparked risk aversion in markets, and took its toll on the high-yielding currencies.

Another reason why I’m not too excited on the Aussie is the rumor that the PBoC might be raising its interest rates soon. And why not? The PBoC’s schedule of its RRR and interest rate hikes was as regular as prime time soap opera, remember? And the PBoC has just hiked its RRR a few weeks ago! Since China is Australia’s biggest trading partner, the news of further tightening won’t go well with the bulls.

My last fundamental basis for shorting the Aussie is the parade of worse-than-expected economic reports from Australia. Aside from weak retail sales and building approvals reports early this week, we also saw how a very dovish RBA dragged on the Aussie. In its latest interest rate decision, the RBA kept its rates at 4.75% and even hinted at a possible cut in economic growth outlook. Yipes!

On the technical side of the trade I saw an overbought Stochastic signal which turned right around the time when AUD/USD was testing the 1.0730 handle. I originally plan to enter at the 61.8% Fib near 1.0750, but I will go ahead and short at market if the 50% Fib was proves too strong a resistance.

AUD/USD 1-hour Chart

Since I’m feeling extra adventurous this week, I’m planning on adding to my winning position if price hits 1.0680. Of course, I’ll also keep really close tabs on Australia’s employment report tomorrow. You see, I noticed that AUD/USD tends to move by 100 pips or so at the release of the report, so I’ll probably close all my positions if it comes out better-than-expected. But if the jobs data turns out worse than expected, I’m adding to my position every 50 pips and moving my profit target to 1.0500!

What do you think? Are my stops and profit levels okay? I would love it if you guys give me a tip or two, or even tell us all about your other trade ideas! You can hit me up anytime on the box below, or even on my @Happy_pip Twitter and Playing with Comdolls Facebook page.

Fingers crossed,
Happy time

  • Ilya Gruntal

    I’m with you on this one, HappyPip! Tho I must say this is risky, since the pair is rising for a year now? More? 🙂
    So since it’s a bullish trend overall I’d love to go Long on this pair as soon as 1.0386 would be hit! And for now it is Short with good risk/reward.
    Thank you for posting this.

    • happypip

       Yep, risk-reward is looking pretty good right now. But woah, 1.0386? Nice! Any reason for the level? 🙂

      • Ilya Gruntal

        Well, Pip, if it would be a reversal, then a downtrend would lead us there. I lost some pips on that freaking candle, it was insane 🙂

  • joe

    really nice trade and setup happy 🙂 went with u on this and closed half position  @1.0668 for a nice 58 pips. well done for spotting it 🙂 

    • happypip

      Thanks joe! Good job on locking some pips too! where’s your next profit target? Are you planning on adding to your position? 🙂

  • Bwellington23

    Good trading idea fundamentally and technically speaking. Lol. Risk to reward is amazing on this one.
    I’ve been on vacation and haven’t had the time to focus in on everything as much as i like.
    You guys keep me in the loop.
    I’m not entering the market until the news releases tonight. I hope it works out to where you can add to your position. #Winning

    Twitter @B_Wellington

    • happypip

      Hmm, vacation! Living the dream already? Hehe.

      Nice to know you appreciate the blog, Bwellington23! Hopefully we all get pips with the upcoming data this week. Good luck in your next trades! 🙂

  • Newguy

    Looks like a nice trade idea, but will wait until next week to look for setups.  Strange things may happen during the short US trading week.  For example, look at gold and silver this week so far!  I believe this trade could test parity!

    • happypip

      Parity, you say? But that’s 700 pips away! I’d like to be on a short trade if that happens though. Good luck on your future trades!

  • Msmncube

    hallow guys i am new from south africa i like to be part of the crew. i just need your opinion here i am trading UERO/GBP at 0.89576 and said its gonna be above that price at 20:00H is it possible that i gonna win that trade?

    • happypip

      Yikes, I’m not an expert on currency crosses. You might rather want to get Cyclopip’s take on EUR/GBP. He’s awesome with currency crosses! Check out his blog right here:

  • Newguy

    Interestingly, AUD is weak versus the performance of the metals.  Will be looking to trade short setups this week off of a moving average.  However, if QE3 hits the fan, i may change my tune!

    • happypip

      Uhuh, the correlation between gold and AUD seems to be off lately. I guess that means the market is in full-on risk aversion mode? That upcoming NFP report could revive QE3 talks though, so you might wanna watch out for that. Good luck on your trades this week!

      • Newguy

        Looks like a nice employment report for the AUD.  Parity may have to wait!  Looks like maybe the best thing would to trade on a shorter time frame for now.  The US stock market does not seem very risk adverse right now as well.