Falling Trend Line on AUDUSD? – Trade Closed

Trade Closed: 2010-01-07 21:03

PoD Chart

Ouch! No thanks to the stellar Australian retail sales result that was just released and yesterday’s Fed’s meeting minutes, I’ll start 2010 with a small hit on my account.

Like Pip Diddy said in his roundup, the meeting minutes showed that the Fed heads were still unsure when they would hike rates and begin to withdraw economic stimulus. This was certainly a far cry from last month, when people were speculating that the Fed could hike rates earlier than expected.

Meanwhile, the Australian retail sales report, which was expected to show only a 0.4% gain, came out with a 1.4% increase instead! Needless to say, both reports caused the falling trend line resistance to break, hitting my stop in the process.

1st half: -121 pips
2nd half: -121 pips
Total: -1.00% loss

Trade Idea: 2010-01-05 22:09:58

PoD Chart

The last couple of weeks, we’ve seen commodities go on a mad run against the dollar. The rally was fueled by a return of risk appetite in higher yielding assets, with the Aussie dollar benefiting from a sharp rise in gold trading. Yesterday, the pair seemed poised to make new highs, but gave up its gains during the latter part of the US session. Could this be a sign that buyers are exhausted? After all, the pair has moved more than its weekly ATR already. Could we be in line for a mid-week reversal?

On the economic front, we’ve got employment data coming out from the US, starting with the ADP report tonight. Early estimations indicate that job losses will dip from 169,000 to 74,000 for the month of December. In addition, the ISM non-manufacturing PMI report will also be released. The index is expected to surpass the 50.0 mark, indicating that the services industry is expanding. Given how the markets reacted to the positive news releases the past couple of weeks, this could provide the support the dollar needs to regain its recent losses.

From a technical perspective, I also have a downside bias on the pair. After weeks and weeks of waiting, the AUDUSD has finally risen up to retest the falling trend line all the way from November. Remember, tomorrow is a Wednesday and a mid-week reversal might be in the cards. Also, with stochastics at overbought territory, I believe there is a high chance that the pair could swing lower to my profit targets.

So, based on my fundamental and technical view, I’ll be shorting the AUDUSD. I placed my stop 120 pips away, roughly equal to the pair’s daily ATR, above the falling trend line and previous high. My first target is set at 0.9000 since this level served as the broken neckline of the recent head and shoulders formation. My second target is set at 0.8750.

Short AUDUSD at market (0.9134), stop at 0.9255, pt1 at 0.9000, pt2 at 0.8750.

Remember to never risk more than 1% of a trading account on any single trade. Please adjust position sizes accordingly.

  • pipsprof.

    Hello lady Happypips!happy new year to you and all your family,the trade idea is excellent and am convinced it has a high probability chance of winning,so i have shorted from 0.9140 and put my stop at just 0.9200 i.e 60pips,i think if it rises to that level,it would have violated the downtrend upwards, and i will be inclined to buy instead,thanks for the trade idea,this is my 1st trade for the new year,and i sincerely wish i start with a winning,hope we all win,my lady!!!!!!!!

  • LoboTrader

    Happy Pips: Happy New Year and i´m with you again in his trade short a 0.9150 Good Luck and my Best Regards

  • pipsprof.

    Hello lady Happypips!happy new year to you and all your family,the trade idea is excellent and am convinced it has a high probability chance of winning,so i have shorted from 0.9140 and put my stop at just 0.9200 i.e 60pips,i think if it rises to that level,it would have violated the downtrend upwards, and i will be inclined to buy instead,thanks for the trade idea,this is my 1st trade for the new year,and i sincerely wish i start with a winning,hope we all win,my lady!!!!!!!!

  • pipsprof.

    GRRRRRRRR!!!!!!!! Trendline already violated,oil making new highs YTD, am buying now, Long 0.9180, SL @0.9080, already lost 60pips,so am going with the uptrend now.Wishing you all a good trade,thanks for the trade idea anyway happypips,sometimes we take a little hit.

  • zekelogan

    Funny, I’m in this exact trade. Best of luck to us!

  • quantisan

    I like to short Aussie now too, but I’m going for the AUDCAD pair instead. AUDUSD just cracked a short term range but AUDCAD is still trading within its range.

    I posted some of my charts at my blog post on AUDCAD short for anyone interested.

    Good luck everyone!

  • LoboTrader

    Happy Pips: Happy New Year and i´m with you again in his trade short a 0.9150 Good Luck and my Best Regards

  • pipsprof.

    GRRRRRRRR!!!!!!!! Trendline already violated,oil making new highs YTD, am buying now, Long 0.9180, SL @0.9080, already lost 60pips,so am going with the uptrend now.Wishing you all a good trade,thanks for the trade idea anyway happypips,sometimes we take a little hit.

  • quantisan

    I like to short Aussie now too, but I’m going for the AUDCAD pair instead. AUDUSD just cracked a short term range but AUDCAD is still trading within its range.

    I posted some of my charts at my blog post on AUDCAD short for anyone interested.

    Good luck everyone!

  • happypip

    Thanks for your encouragement guys! Unfortunately for me (and for you guys as well, apparently), the surprise results from the Fed meeting minutes and Australian retail sales blew my trade idea away! Like you said pipsprof, sometimes we just have to take a hit. :)

  • happypip

    Thanks for your encouragement guys! Unfortunately for me (and for you guys as well, apparently), the surprise results from the Fed meeting minutes and Australian retail sales blew my trade idea away! Like you said pipsprof, sometimes we just have to take a hit. :)

  • charrell

    Wouldn’t the weekly uptrend in addition to breaking of the daily trend line be enough to consider this retracement as over? There appears to be a weak Double Bar Low High Close pattern after yesterdays close that would also indicate a continuation of the uptrend.

    Personally I believe it is a great opportunity to buy. However, I have just started demo trading after weeks of reading, so this is purely an amateur observation. It may be better to wait until after tomorrow’s NFP report before deciding.

  • charrell

    Wouldn’t the weekly uptrend in addition to breaking of the daily trend line be enough to consider this retracement as over? There appears to be a weak Double Bar Low High Close pattern after yesterdays close that would also indicate a continuation of the uptrend.

    Personally I believe it is a great opportunity to buy. However, I have just started demo trading after weeks of reading, so this is purely an amateur observation. It may be better to wait until after tomorrow’s NFP report before deciding.