Risk aversion seems to be weighing on the commodity currencies once more so I’m watching this potential trend line break on AUD/USD. Check it out!
The pair already turned upon hitting strong resistance at the .7650 minor psychological level, which lines up with an area of interest. This could mean that sellers are ready to push AUD/USD down to the support near the .7000 major psychological level.
For now, price is still trading above a rising trend line on the 4-hour time frame so I’m waiting for more confirmation before shorting. A candle closing below the .7500 handle could be enough to signal a break lower, likely taking the pair to the next area of interest at .7350. I’ll be ready to trail my stop to entry once price hits that level.
Earlier in the week, the RBA minutes revealed that policymakers were more worried about inflation than they seemed in their actual rate statement. Data from the Land Down Under hasn’t been so impressive anyway, as last week’s jobs release showed a smaller than expected 7.9K gain in hiring while the MI leading index printed a 0.2% decline.
To top it off, the downgraded IMF growth forecasts could dampen risk appetite for the time being, as traders project weaker demand for raw materials and commodities. The U.S. dollar seems like a good buy in this case, as the U.S. economy has been faring pretty well and the Greenback could benefit from risk-off flows.
Here’s my plan:
Short AUD/USD at .7475, stop loss at .7825, profit target at .7025. I’ll be risking 0.5% of my account on this setup for a potential 1.28-to-1 R:R. Don’t forget to read our risk disclosure if you’re joining me!
Other Popular Articles:
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.