I’m counting on this week’s NFP release to boost the dollar bulls’ spirits so I’m looking at this potential short forex setup for AUD/USD. At the same time, I doubt that the Aussie’s recent rallies would last since the RBA hasn’t really let go of its easing bias yet.
The pair’s 4-hour forex chart shows a simple break-and-retest setup forming, as price is moving close to the broken support at the .7850 minor psychological mark. This lines up with the 50% Fibonacci retracement level, which might keep further gains at bay.
However, it looks like the 38.2% Fibonacci level is already holding as resistance while stochastic is indicating overbought conditions. Aussie bears might be ready to take control of the game and push the pair back to its previous lows around the .7600 major psychological support.
Earlier today, Australia released a weaker than expected retail sales report, reflecting a flat reading for April instead of showing the projected 0.4% increase. To top it off, the previous month’s figure was downgraded to show a mere 0.2% uptick. And that’s not all! Australia also printed a wider than expected trade deficit of 3.89 billion AUD versus the estimated 2.17 billion AUD shortfall, possibly due to weaker export activity.
With that, I’ve decided to short at market and set a wide stop past the highest Fib and the .8000 major psychological level. As I’ve mentioned in my Comdoll Trading Kit for this week, there are a bunch of top-tier reports lined up from the U.S. economy also and this could spur additional volatility for AUD/USD.
In particular, I’ll be keeping close tabs on the May jobs report, which might seal the deal for a Fed rate hike in September. I’ll be ready to add to my position if the actual reading comes in way stronger than expected and enough to push AUD/USD below its previous lows at .7600. On the other hand, if the report churns out downbeat figures, I’ll be sure to exit early.
What do you think of this forex trade setup?
Other Popular Articles: