The RBA decided to keep interest rates unchanged at 1.50% as expected, causing AUD/USD to break above its short-term channel resistance. Will the long-term channel keep holding, though?
AUD/USD Trade Setup
I was already watching this pair’s short-term descending channel earlier this week and I had a gut feeling that it would make an upside breakout. However, I decided to hold off any positions prior to the actual RBA announcement. I figured that a less-dovish-than-usual statement could trigger a move past the .7600 major psychological resistance so I set buy stop orders instead.
Besides, price did show signs of bouncing off the longer-term channel support around the .7500 mark so Aussie bulls were probably just getting warmed up. Now that bullish momentum is in play, AUD/USD could set its sights on the channel resistance around .7800 next.
Of course we’ve still got a bunch of event risks lined up from Australia, including the quarterly GDP and the trade balance due later on in the week. By the looks of it, traders may have already priced in a weaker Q2 growth figure and are paying closer attention to more recent data instead. Still, I’ll keep an eye out for any significant disappointments that could bring RBA easing expectations back on the table.
So far, the Greenback still seems to be reeling from the downbeat NFP release last week, as this dampens hopes for a Fed rate hike this month or even in December. This could keep risk appetite going, which is also positive for the higher-yielding Australian dollar.
Here’s what I got:
Long AUD/USD at .7615, stop loss at .7475, profit target at .7775. I’ve risked 0.5% of my account on and I’m aiming for a 1.14-to-1 R:R with this setup.
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See also: Q2 2016 Trading Performance Review
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