And I’m in! Downbeat Australian retail sales data convinced me to hop in a short position at market with this AUD/USD pullback setup. Take a look!
As I’ve mentioned in my watchlist blog entry last week, I think AUD and USD represent a good pairing of weak vs. strong currencies but that I wanted to catch a higher retracement on this pair. Lo and behold, price is now approaching the descending channel resistance visible on the 4-hour time frame and might be ready to turn lower from these Fibs.
Just a few minutes ago, Australia printed a smaller than expected 0.2% uptick in retail sales instead of the estimated 0.4% gain in November. This could translate to yet another weaker than expected GDP figure for the quarter, following the surprise 0.5% contraction in Q3. I was able to short at .7350 with a stop past the swing high of .7525 and a profit target near the .7000 major psychological support.
Even though it seems to have been off to a shaky start this year, I’m still bullish on the Greenback mostly due to the Fed’s tightening bias. December NFP results may have missed the mark but this didn’t seem to stop a couple of central bank officials from maintaining an upbeat outlook and reiterating that more rate hikes are in the cards.
Also, China has been printing mixed data recently, showing a downside surprise in CPI (2.1% actual vs. 2.2% consensus) and an upside surprise in its PPI (5.5% actual vs. 4.6% consensus). Prior to this, its official manufacturing and non-manufacturing PMI readings showed declines while the Caixin version of the report indicated improvements. Either way, Chinese monetary authorities seem to be scrambling to rein in bearish bets against the yuan and offshore investments, signaling that they’re more worried about the economy than usual.
Here’s what I have:
Short AUD/USD at .7350, stop loss at .7575, ultimate PT at .7025 for a 1.44-to-1 R:R. I’ve risked 0.5% of my account on this position and I’ll be ready to trail my stop to entry once price tests the swing low at .7150. Don’t forget to check out our risk disclosure if you’re trading this one, too!
See also: Q4 2016 Trading Performance Review