Long AUD/USD: Fourth Time’s the Charm? – Trade Closed

Oh no, not again! Just when I thought I was able to join the uptrend at such a good price, the tide turned and AUD/USD sank like a heavy rock. Well, my heart sank too after my trade got stopped out!

I really hoped that this trade would bring my account back in the green, especially when I saw that AUD/USD bounced by more than 50 pips from my entry. Even though it dipped to the 1.0800 handle the next day, I kept my fingers crossed when I noticed that stochastic was starting to climb.

Curse those weak reports from the U.K. and euro zone! The U.K. kept releasing one disappointing PMI figure after another, causing many traders to think that the economic rebound is losing steam. Combine that with dovish comments from the ECB and risk aversion came back in full swing!

AUD/USD 1-Hour Chart

In retrospect, I probably should’ve taken it easy with my bullish AUD/USD bias when my past AUD/USD long trades didn’t work out so well. I guess I should’ve taken those as signs that a reversal was brewing. Silly old me!

Anyway, here’s how it turned out:

P/L: -80 pips / -1.0%

Ah well, my account is down in the dumps again. Thankfully I got you guys to cheer me up! I really appreciate how most of you make the effort to give feedback on my trade ideas, share your own trade setups, and even offer a kind word or two to make me feel better. Keep ’em coming!

Trade Idea: 2011-05-04 8:09

Just like the new Black Eyed Peas beat, I just can’t get enough of the Aussie! After my trailing stop got hit on my last AUD/USD trade, I’m back with another long trade idea! Watcha think of this one?

As we all know, the dollar has been gaining a lot against its counterparts since Monday when the U.S. killed the number one bad guy in the world (yay for the Navy Seals!) Unfortunately for the Aussie, a strong Greenback means weaker commodities like gold, silver, and oil.

But like an American Idol fan who just won’t stop trying to be famous every season, I’m also not giving up on the Aussie just yet! As Forex Gump wrote on his Osama and the Dollah article, the underlying fundamentals for the dollar hasn’t changed since Monday. The Fed is still as dovish as ever, while the RBA is being tight-lipped about the future of its interest rates.

AUD/USD 1-Hour Chart

On the technical side, a lot of nice guys on my Twitter and Facebook accounts have been confirming my thoughts that we’re seeing a pullback on AUD/USD this week. Though AUD/USD has been showing a strong downside movement, the pair hasn’t broken the rising trendline that I drew a couple of days ago. In fact, it’s currently dancing around the 1.0850 level, which is the support of my rising trendline on the daily chart.

Speaking of 1.0850, that’s exactly where I entered my trade yesterday! I thought I could get a bargain on AUD/USD when it was falling, so I set my order at 1.0850 because I saw a possible support at the minor psychological handle. Oh, and it helped that Stochastic was in the oversold region at the time, and a bullish divergence was also popping up.

My trade is down by a couple of pips right now (huhuhu) but I hope that the pair reverses before it hits my stop loss!

For this trade, I risked 1% at 1.0850 and initially put my stop loss at 1.0750 (my trailing stop is now at 1.0770). Last but not the least, I plan on taking profit at the week’s open price near last week’s high (1.0970).

I’m a lil’ bit unsure if I should cut my losses now, so a few tips is most welcome!

Fingers crossed,
Happy time

  • Bogdan Virjoghe

    looking good after the pair reversed (as you hoped) so i joined this trade, entered at 1.0860… same target and stop loss as yours, hope it works ^^.. good luck!

    • happypip

      Oh man, I’m sorry to hear that. We both got stopped out already then. Better luck on our next trades and see ya around!

      • piphawk

        i just entered a buy around 1.076 and looking for support around 1.071. honestly i dont know if it was a smart idea but it broke out across my one hour trendline fingers crossed

  • Darkforce82

    I am still watching, but given the huge interest differential, there’s no way AUDUSD will reverse the trend. Personally I’ve looking for signs of recovery in the equity market to determine when the risk appetite will return to the market

    • happypip

      Ugh, that’s what I thought too! Plus, the RBA has much better chances of hiking rates in the near future compared to the Fed. But, like the other readers mentioned, risk aversion seems to be the sentiment for now. Good idea about watching equities for signs of risk appetite. I watch the commodity prices myself and I’m seeing a possible support for gold at the $1500 level, but I’ll see if I can keep tabs on equities as well. Feel free to share your thoughts on whether risk appetite is back or not later on!

    • Sajitrade

      This might be a very basic question how do you calculate the interest differential?

  • Fecri Irsat

    this was a bad idea, if you look at the daily chart the price is overbought which the price had to make itself down to around 1.0500 area

    • happypip

      Ouch! But yeah, I did notice that stochastic was overbought on the daily chart. Problem was, stochastic had been there since the last week of March, when AUD/USD was still around the 1.0200 area, yet the pair still climbed 800 pips after that. 1.0500 does seem to be the next level of support though, I’ll keep an eye out for that. Thanks for your feedback!

  • foricks

    Hey, Doll,
    Per my last comment, I could not sit on my hands any longer after we broke 1.0780. While I was out cutting the grass, my cad trade closed at .9600 (+60 pips) and 4 minutes later, my AUD Buy entry triggered at 1.0745. I was a little more patient and got in after the london close (usually a good reversal time) and will close around 1.0850. It has been a crazy week with huge mood swings, but the market so desperately needed this.

    • happypip

      Good luck! I hope your trade works out for ya! You’re right about the crazy mood swings and I’m having a tough time keeping up. See ya around!

  • Michael

    It wasn’t a good idea because we have kind of risk-aversion currently which means Aussie/Kiwi -> down. I’m also bullish on the Aussie, but you must be patient and wait until we have good support at some price.

    • happypip

      Thanks for the feedback Michael! Yeah, I do realize that now. I just thought that what we saw the first couple of days of the week was a mere pullback before the risk rallies resumed. Well, I guess I’m wrong and I have to be able to bounce back in my next trade. Do share your comments again then! See ya!

  • ForexFish87

    Was rooting for you on this one. Sorry to see that it got stopped out.

    • happypip

      Aww, thanks ForexFish87! I’m sorry to see it got stopped out too. I guess dollar strength is really the theme now, huh?

  • snpfx

    hey happypip, i’m sorry that we lost our trade, but dont worry, theres always an oportunity in forex. cheer up:)

    • happypip

      Thanks so much for cheering me up snpfx, I really appreciate it!

  • nzmilk

    Hi, your entry point was the right place in terms of the technical point, but the fundamental didn’t support Aussi. When the pair reach to the major support line like trendline (See attached 4hr chart), it would be a good idea to wait and get the confirmation. Around 1.0800 area was both 4hr and daily chart trendline support area. Now both lines were broken and selling power may be strogner than buying. See the attahce chart for next support level. Happy Trade and I enjoy your article.

    • happypip

      Yeah, I probably should’ve waited for more confirmation when the price was sitting right on the trend line. Looks like the odds are against the Aussie now that Australia printed a drop in retail sales. Let’s see how it goes. Thanks for your feedback nzmilk, and keep ’em coming! 🙂

  • Sajitrade

    This is why I like your blog. You show and explain the failed trade as well. This is encouraging as, I am was long on USDCAD but I got killed… my technical’s were accurate, but the entry was not. As suggested by nzmilk I should have waited for confirmation.

    Thanks again. please keep posting

  • Dean FX Paul

    I really like your chart graphics 😀

    Yeah unfortunately bad Retail Sales figures yesterday, along with commodities losing steam really hit AUD.

    Personally, I’m still short in the days ahead, expecting it to go to 1.05 at least, but also expect it to resume its up trend in weeks ahead.
    There is really no reason at this point for the RBA to hike its rates, seeing as people aren’t spending crazily, and oil/commodities have now had a cooling off.