I’m still keeping a close watch on this long-term AUD/USD symmetrical triangle pattern and I’m considering a straddle play while waiting for some momentum in either direction. In case you missed it, check out my initial trade idea from a few weeks back.
The pair is still hovering around the triangle resistance at the .7700 major psychological level, unable to make up its mind whether to go for a bounce or a break. A breakout could take AUD/USD up by a thousand or so pips, which is roughly the same height as the triangle pattern. Stochastic is indicating overbought conditions and looks ready to turn lower, hinting that sellers could get the upper hand soon.
But when I zoomed in to the 1-hour time frame, I’m still seeing that ascending channel keeping losses at bay.
Price is currently testing the channel support just above the .7650 minor psychological mark and another bounce could take it up to the resistance at .7750.
If the channel support breaks, the pair could be in for a reversal from its short-term uptrend, possibly even taking price down to the longer-term triangle support at .7250-.7300.
I’m turning bullish on the U.S. dollar these days as futures are hitting record highs and pointing to another strong run in equities for the week.
A handful of major retailers are scheduled to report quarterly earnings and upbeat results could send positive signals throughout the U.S. markets.
To top it off, Fed rate hike expectations for March could revive demand for the Greenback as the actual announcement draws near and economic data continues to support that hawkish view.
FOMC minutes are up for release this week so maybe we’ll get a better idea of how majority of the policymakers are inclined to vote next time.
Forex junkies are also on the edge of their seats anticipating Trump’s “phenomenal” tax announcement, which could lead to another leg higher for U.S. stocks.
However, the Australian dollar is also enjoying strong support at the moment, thanks to the relatively balanced RBA meeting minutes.
Expectations of stronger demand from China and a return in risk appetite could also boost the higher-yielding currency, but geopolitical risks and debt troubles in Europe could carry more weight in terms of influencing overall market sentiment.
I’m just gonna let price action make the decision for me, but I’ll be prepping my entry levels in case we see a big move.
I’m looking to short at .7625, with a stop at .7825 and a target at .7275 for a 1.75-to-1 R:R but I’ll also be ready to go long at .7775, with a stop at .7575 and an initial target at .8175 for a 2-to-1 R:R.
Don’t forget to check out our risk disclosure if you’re trading this one, too!
See also: Q4 2016 Trading Performance Review
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