Trade Idea: AUD/USD Channel Retracement

AUD/USD’s ascending channel on the 4-hour time looks like a neat technical setup, but do the fundamentals back it up? Here’s my trade idea for this week.

As you’ve probably seen in my Comdoll Trading Kit, I’ve been watching this potential pullback play to AUD/USD’s channel support. In particular, I’m waiting for a retracement to the 50% to 61.8% Fibonacci levels, which are close to the bottom of the channel and the area of interest around .7550 to .7600.

AUD/USD 4-hour Forex Chart

AUD/USD 4-hour Forex Chart

Price seems to have bounced off the 38.2% Fib already but I’m not in a rush to take any long positions since we’ve still got a bunch of top-tier reports due from the U.S. and Australia. Both the FOMC and the RBA are set to print the minutes of their latest policy meetings while Australia will be releasing its July jobs figures on Thursday.

I’m AUD bullish mostly because of the continued rise in iron ore prices spurred by strengthening demand from China. Expectations of additional stimulus from the Chinese government and central bank also appear to be supporting the Aussie since this could further increase appetite for commodities. Meanwhile, the FOMC minutes might show a hint of caution from Fed officials, likely dampening rate hike hopes and dollar gains.

I’m expecting additional volatility for this pair right around those major catalysts, probably enough to take it down to the channel support. I’m seeing a bit of a bullish divergence right now, though, as price made higher lows since July 19 while stochastic had lower lows then. If I’m able to get in a long position around my buy area, I’ll set my stop near the swing low at .7425 then aim for the channel resistance.

How about you guys? Which comdoll setups are you watching this week? Don’t be shy to share your market thoughts and trade ideas in our comments section below!

Cheers,

Happy time

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