Is AUD/USD Ready to Drop? – 1.5% Win!

Trade Closed: 2012-06-25 09:32
Woohoo! It feels to great to start the week off by closing a winning trade! Just when I thought that I missed my PT at parity when AUD/USD dipped to a low of 1.0008 last week and that I might have to make more adjustments on my short trade, the pair made new lows today and seems ready to break below the 1.0000 handle.

AUD/USD Trade Closed

You might be wondering though why I decided to take my profits and walk away instead of holding on until AUD/USD actually breaks below parity. Well, for one thing, the 1.0000 mark is closely in line with last week’s low as I pointed out in my Comdoll Trading Kit for this week.

Another reason is that, with the summer drying up some of the liquidity in the markets, we could be in a ranging environment and I’m inclined to think that significant inflection points could hold well during these situations.

Although fundamentals still suggest that AUD/USD might have room to fall further, it’d probably be better for me to wait for an actual breakdown to take place first then just come up with another trade setup to jump in later on. For now, here’s what I got:

P/L in pips: 170 pips on my first position and 110 pips on my second position, for a total of 280 pips or an average of 140 pips per position

P/L in %: 0.8% on my first position and 0.75% on my second position, for a total of 1.55%

Pinch me if I’m dreaming, but I think this may have been my biggest win for this year. I couldn’t have done it without your support and feedback, so thank you from the bottom of my heart! Keep ’em coming!

Trade Update: 2012-06-22 1:22

Yipeee!!! Looks like I’m holding on to my winning streak for a while longer!

Thanks to growth concerns in China, debt worries in the euro zone, and weak economic data from the U.S., risk appetite took a nasty tumble yesterday. The Aussie was hit the most among the major currencies with AUD/USD plunging by 145 pips.

Good thing we’re in the right side of the charts this time! AUD/USD fell sharply during the later trading sessions, enough to trigger my second order near 1.0115. With the pair hanging at the 1.0050 minor psychological support, my first position is currently up by 125 pips and my second trade is up by close to 60 pips for a total of 185 pips or an average of roughly 90 pips per position.

AUD/USD Trade Adjustments

So how do I plan on getting out? Well, I’ve already adjusted my stop on both positions to my latest entry (1.0115) to lock in 60 pips on my first position and have a risk-free second position to hold over the weekend. Not too bad a plan, I think.

What do you think of my trade adjustments though? Should I get out completely and close all positions ahead of the weekend or keep my risk-free trade open? As always, your thoughts are very much appreciated!

Trade Update: 2012-06-21 10:22
And we’re in! My first entry order just got triggered and I’m hoping this could head all the way down to my profit target. Price pulled back right to my short order at 1.0175 during today’s U.K. session as risk appetite somewhat improved after the release of better than expected U.K. retail sales data.

AUD/USD Trade Update

However, the 1.0200 handle still seems to be holding like a boss and that’s probably because of the weaker than expected U.S. jobless claims report which kept the risk rallies at bay. Whether this behavior continues could still depend on a couple more U.S. releases due today, namely the existing home sales and Philly Fed index.

I’m inclined to think that, now that the FOMC has already announced its policy decision, the U.S. dollar could benefit from risk aversion again. Do you agree with me? As always, I look forward to getting feedback from y’all!

Trade Idea: 2012-06-21 03:08
Now that the Greek elections and the FOMC statement are behind us, will traders go back to trading on fundamentals?

I know I am! While all eyes were on the U.S. and the euro zone, I noticed that nothing much has changed in Australia’s landscape despite the not-so-dovish RBA minutes released early this week. Not only that, but growth prospects in China, Australia’s largest trading partner, haven’t improved either. In fact, the HSBC manufacturing PMI further dropped to 48.1 after printing a 48.4 reading in May.

Besides, now that the Greek elections are over, I’m thinking that investors will soon pay attention to the rocketing bond yields and bailout prospects of peripheral economies. The EU Summit can ease some concerns, of course, but given the EU officials’ track record, I’m not expecting much.

On the technical side I’m looking at the spinning top on AUD/USD’s daily chart to signal a reversal. After all, the level is also sitting right near the 1.0200 major psychological level and a possible 50% Fib retracement. Oh and I hope you’re also seeing the giant bearish divergence on the chart!

AUD/USD Bearish Divergence

I placed my short order at today’s open price (1.0175) since I’m expecting a pullback to the former support area on the 1-hour chart. If price drops below the previous day low and this week’s open price, then I’ll move my stop to break even and add to my position.

AUD/USD Broken Range

Here’s my plan:

Placed a sell limit order at 1.0175, add a sell stop order near the week’s open price, and then place my stop loss at 1.0275. My initial profit target is at parity, but I can always adjust it depending on the strength of the price action.

Anyone in this trade with me? Remember to read the risk disclosure!

What do you think of my plans? Are you also expecting high-yielding currencies to weaken in the next couple of days? Why or why not? Don’t be shy to share!

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Good luck in your trades this week, buddies!

Happy time

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  • Sazzad

    Same calculation I tiger my short position let see what happen 

    • happypip

      Yep, let’s see what’ll happen! Good luck to us and thanks for checking out my blog! 

      • Sazzad

        HI have you any calculation about ERU/USD. Its already break daily & weekly pivot this down trend will be continue.

        • happypip

          Unfortunately, I don’t watch EUR/USD so often so you might wanna ask our friendly barista trader Huck (… because she watches the majors more closely.

          My take is that the US dollar seems to be acting as a safe-haven again and, if it’s euro zone debt troubles that are driving the markets again, there’s a good chance that the downtrend could carry on. 

  • Daniel

    i got into this a little later than you and have my PT at 1.00614 as there seems to be a resistance level there on the 4hr. ill probably trail after that.

    the US unemployment claims reports coming out in a bit is concerning me right now…

    • happypip

      It came out worse than expected. Was that what you were hoping for? Or were you also observing how the dollar would react to the release and whether it’d be moved by fundamentals or risk sentiment? Share your thoughts with me! 

      • Daniel

        with very few jobs being created and increasing unemployment i was worried about terrible news causing a shift in sentiment. Thankfully that doesnt appear to have happened 🙂

  • Anthony

    I’ll wait to see what the US Unemployment Claims are, then will most likely short and ride down to parity. Keep up the AUDUSD blogs!

    • happypip

      Were you hoping to see a worse than expected reading? Don’t forget there are a couple of other releases from the U.S. in a few hours, too! 

  • mero koli

    The idea looks nice but i won’t take it . Trend line is not confirmed yet as we learned in babypip school it need two tops to draw a trend line  and a third top to confirm it . Besides stochastic must be in overbought in the previous tops so i think the divergence is not so correct
    Yet Aussie may range a little in next days because of overbought stochastic I hope your profit target get hit …. nice hunting

    • happypip

      Oh you might have mistaken that pink line I drew connecting the recent highs as a trend line! I only connected those to show the bearish divergence that formed with the stochastic. You’re right though, trend lines need to be confirmed by a third top (or bottom) and that strictly speaking, divergences are made by connecting the overbought parts. I only connected the third one because stochastic did make a turn at that point and that it was interesting to note how the divergence seemed to be very long-term one. 

      Thanks for checking out my blog and for the feedback! I agree with you that this pair might be stuck in a range for a while, given the lack of liquidity this summer. If it does stay there too long for my comfort, I’m probably gonna exit early and look for a more short-term trade instead.

      See you around!

  • Adrian Taylor

    I was trading long AUD between the 1.0170 to 1.0200 range and managed to pick up some ok profits along the way but I am joining you on the Short AUD trade. Just bought USD at 1.0180 and planning to ride it down to just short of parity. Stop loss set at 1.0275

    • happypip

      How long do you think it’ll take to reach that target though? I’m aiming for the same PT as you are but I’m worried that the lack of liquidity this summertime could prevent AUD/USD from making one-directional moves. Just something I’m thinking about lately. But hey, good luck to us!

      • Adrian Taylor

         I’ve adjusted my PT to 1.0105 as I think I was being a bit ambitious. I’m just going to see how it plays out over the next couple of days. Good luck 🙂

        • Adrian Taylor

           I love the smell of profits in the morning 🙂

          • happypip

            Congratulations! Let’s keep it up! 🙂

  • Sazzad

    HI have you any calculation about ERU/USD. Its already break daily & weekly pivot this down trend will be continue.

  • Tom

    Well done Happy Pip. It was something that I picked up on as well with the 1 hr chart showing bearish divergence. The Chinese PMI data was what made the AUD keel over and turn bearish.

    • happypip

      Yeah that really pushed this pair over the edge, huh? Not to mention another round of weak figures from the US really turned risk off and also triggered Aussie selling. Thanks for checking out my blog!

  • Mcaochuka

    My analysis shows me that we are in to challenging latest lows again!, I short AUDUSD at 1.0123 and ran it all the way down before closing for weekend. After my weekend analysis, my next short will be 1.0100 or little lower for what I see as another big bearish leg.
    Keeping your shorts would in my view be ok

    • happypip

      Thanks for the encouraging words! I do believe this pair has room to fall further, especially if risk is still down this week. Good luck with your trades!

  • Baseballman

    Sweet trade – Nice setup! I am still learning to properly interpret inflection point candles and your running commentary on trades is quite helpful.

  • InnerCircleTrader

    Nicely done… 😉