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Upside breakout alert! AUD/USD surged past its triangle resistance but I chickened out of hopping in at market, so I’m gonna wait for a pullback instead.

Long AUD/USD Idea

In my watchlist blog post, I wasn’t strongly leaning towards any direction on this pair since there were plenty of event risks lined up for the week. Even though dollar weakness on Trump’s fiscal reform setbacks came into play earlier on and pushed this pair past .7750, I worried that it might be a fake out ahead of the release of the RBA minutes and the Australian jobs report.

However, RBA policymakers actually sounded less downbeat than expected in their latest huddle, allowing the Aussie to extend its climb. This currency even shrugged off the slightly weaker than expected jobs figures for June and came within striking distance of the .8000 handle, partly buoyed by strong Chinese as well.

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

But since the pair already moved past twice its WATR on that rally, I hesitated to jump in at market for fear of profit-taking at the nearby resistance levels. Instead, I’m looking to enter on a quick pullback.

Using the handy-dandy Fib tool on the latest swing low and high on the 4-hour chart shows that the 61.8% level is closest to the broken long-term triangle resistance and a rising trend line connecting the lows since June. However, I think a shallow correction might be in order given the strength of the move, so I’m also open to going long just above the .7800 mark near the 38.2% Fib.

We’ve got a couple of RBA policymakers stepping up to the podium today and many are expecting them to talk down the Aussie and downplay tightening speculations. Still, the .7700-.7750 area might hold as a floor as dollar weakness remains in play.

Last time I checked, the Trump leadership is under fire again for failing to push its healthcare bill in Senate and for the President’s alleged involvement in shady business deals with Russians. Investigations are still ongoing but this could mean a fresh set of political jitters that could add downside pressure on the U.S. currency.

Here’s my plan:

Long AUD/USD at .7825, stop loss at .7675, profit target at the next long-term area of interest at .8125. I’ll be risking 0.5% of my account on this play for a potential 2:1 trade.

What do you guys think? As always, I enjoy getting your feedback on my trade ideas!

Cheers,

Happy

See also: Q2 2017 Trading Performance Review

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