It looks like sellers did take back control on AUD/USD after resistance formed, pushing the pair quickly in my favor. With the potential for risk-on catalysts to pop up anytime, I decided to adjust my trade to lock in a profit and adjust my max target in case the markets continue to go my way.
AUD/USD Resistance Play
Last week I decided to short AUD/USD based on the resistance forming on the four hour chart above, and on my expectations of a disappointing round of Australia employment updates. I decided to scale into my trade, starting at market (0.7159) with 0.50% max risk, and another short order at 0.7215 with another 0.50% max risk.
Since then, the sellers did take back control around the 61% Fibonacci retracement area, and with the help of negative job growth and commentary from RBA Governor Lowe of potential negative rates in Australia, the Aussie has sunk against the majors this past week. We’ve also got broad risk sentiment at play on the pair, as the market sours on risk with every day the U.S. does not come up with another pandemic relief stimulus bill.
So, it looks like the bears are firmly in control, but with the possibility of a U.S. stimulus bill and other potential risk-on catalysts lurking in the shadows (e.g., a Brexit deal, a COVID-19 vaccine announcement, world peace, etc.) I’ve decided to lock in the small profit I got, cancel my second short order, and adjust my max target. Here’s what I did:
- Closed second short order at 0.7215
- Rolled stop on open position down from 0.7270 to 0.7120
- Adjusted max stop from 0.7025 to 0.7005
These adjustments locked in a profit of +0.17% and increased my potential profit of 0.60% at 0.7025 target to 0.70% at 0.7005 (a return of 140% return-on-risk).
So, I’ve got a virtually risk-free trade on my hands now, and nothing to do but watch and see how it all plays out. I may roll my stop lower if the market outlook continues to look sour on the Aussie and/or broad risk sentiment, so stay tuned for those 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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