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Taking another shot at AUD/USD on what could be a very busy week for both the Aussie & Greenback.

AUD/USD Pullback Opportunity?

AUD/USD Daily Forex Chart
AUD/USD Daily Forex Chart

This week we’ve got top tier economic catalysts on the calendar from both Australia and the U.S., most notably the latest monetary policy decision from the Reserve Bank of Australia and the latest employment update from the U.S.  The list of potential market movers is actually larger than that, but it’s likely the longer-term trend of AUD/USD will be dependent on those developments.

And I’m looking at the longer-term trend as the U.S. economic seems to be broadly outperforming the Australian economy, especially with the latest Aussie data looking net weak at the moment (e.g., Australia building approvals nosedived by a shockingly large 8.1% in OctoberAussie manufacturing output hits 3-year lowJob ads fall 1.7% November). This lowers of the odds of the RBA sounding optimistic on the economic outlook, which could bring on Aussie sellers this week.

From a price action standpoint, AUD/USD has been in a downtrend these year, clearly shown on the Daily chart above. 0.6700 – 0.6750 recently held off the bulls leading to a bounce, and now we may see a retest of the falling highs pattern pretty soon. This area also lines up with a strong area of interest between 0.6870 – 0.6920, which was previously support earlier in the year and now has become resistance in the past few months. So, if the market retests this area, I will take a short position to play my fundamental bias in favor of USD over the Aussie.

For now, I’m putting on a conservative entry order and position size given the level of economic catalysts coming up, with a stop of around one weekly ATR. My max target will be the 2019 lows, but I won’t hesitate to take profit if the situation changes. Here’s what I’m doing:

Short half position AUD/USD at 0.6890, max stop at 0.6980 with 0.50% max risk, max target at 0.6710

I’ll be risking 0.50% of my account to start for a 2.25:1 return-on-risk, but I’d be happy to settle for less (around 1:1 R:R) if I can get that kind of return before the U.S. employment updates. If the RBA event doesn’t go my way (i.e., surprisingly optimistic commentary from the RBA), I’ll likely cut my orders/live trade.

That’s it for now. Stay tuned for updates and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

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