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Trade tensions are back in play, and the RBA is widely expected to cut interest rates this week. Think I’ll be able to catch a short setup at these levels?

Short AUD/USD Idea

This pair recently tumbled below the support area around .7000-.7050 on its downtrend, but it seems to be in the middle of a pullback to this zone.

Looking at the Fib retracement tool reveals that this potential support-turned-resistance area is spanned by the 50% to 61.8% Fib levels and is just below the longer-term falling trend line.

Stochastic is already closing in on the overbought region, though, so buyers might be feeling exhausted at this point. Then again, I’d wait for the oscillator to head back down to confirm that sellers are taking over.

AUD/USD 4-hour Forex Chart
AUD/USD 4-hour Forex Chart

I’m Aussie bearish mostly because of RBA rate cut expectations, although this might have already been priced in. Still, if the central bank hints that they’re open to further easing for the rest of the year, it could mean even more downside for the currency.

Besides, the return of trade war concerns could also drag the Aussie lower in the long run as the U.S. and China don’t seem to be done throwing tariffs and threats at each other. It doesn’t help that the U.S. will also be increasing its tariffs on products from Mexico, keeping a lid on business optimism and risk appetite.

I’m a bit iffy on the Greenback since the U.S. economy does stand to take hits from these trade tensions, but past price action indicates that the dollar was still able to benefit from its safe-haven status.

To top it off, the Fed remains the least dovish among the major central banks as it simply intends to keep rates unchanged while others seem more open to easing.

I’m looking to short at .7075 or the 61.8% Fib, with a stop just past the .7100 mark and the trend line. I’ll aim for the swing low initially since this key support has been holding since mid-2015, but I’m open to setting my sights lower if it breaks.

Care to share your thoughts on this setup?


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