AUD/USD Resistance Play
With leading economic indicators pointing to a potentially disappointing Australian jobs report, I decided to look for short AUD opportunities in Aussie dollar pairs, finding this resistance pattern formation on AUD/USD.
We can see that the bulls have had no luck breaking above the area around 0.7200 – 0. 7250, likely due to a turn in risk sentiment this week (likely a reaction to negative COVID-19 news related updates), and probably on expectations of a weak Aussie jobs number.
Now since the pair has already moved nearly one weekly ATR since the week open, and given the oversold signal from the stochastic indicator, I’m not going to take the trade with a full short position.
I’m going to start with a nibbler position at the market and set an order for another short near the recent swing high to complete my full short position.
My stop will be above the recent swing high and 61% Fibonacci retracement level, which should be enough room to breathe for the week. And my max target will be the recent swing low for a good potential return-on-risk. Here’s what I’m going to do.
Short half position AUD/USD at market (0.7159), max stop at 0.7270, max target at 0.7025
Short half position AUD/USD at 0.7215, max stop at 0.7270, max target at 0.7025
I’ll be risking only 1.00% of my account if both positions are triggered, and my max potential return-on-risk starts at 2.32:1. But depending on the data and shifts in market themes, I may add to this position if the odds rise of continued favor of the Greenback over the Aussie (i.e., RBA increasing stimulus measures, rising risk-off sentiment, no further U.S. stimulus, etc.).
If the Aussie jobs data comes in way better-than-expected, I’ll reassess and potentially close down the idea depending on the market reaction and other market themes at the time.
That’s it for now, stay tuned for updates / adjustments, 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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