A view on AUDUSD

For those of you who read the site but are not privy to the trading room, the AUDUSD has been the subject of a lot of chatter. Yes, I know there are other things apart from Brexit and trading GBP! (Although you would have never have thought so) Anyway I digress.

The reason for such chatter is that last week the pair broke through 0.73 and closed above. Big deal I hear you say. Well ummm yes it was. Not only was the big old trend line broken but also a rather tasty fib level. The daily and weekly charts look like a trend change in the offing. For myself I would have liked to have seen the weekly close above the broken area cluster of 0.73 to confirm this break. This would suggest a good bottom in place. I like looking for long term set ups then buying and holding adding where necessary and trading it inside out both ways. They have been few and far between in last couple of years for myself. Right now, AUD is a negative carry v Usd but it’s negligible.

AUDUSD weekly

As you can see the weekly shows a great picture. For me a pull back and hold of the 0.7250/80 level and a decent close above that would confirm the bullish nature. This can be better shown on the daily. Looking upwards I think it would be reasonable to expect first target and roadblock to be around the 38.2% which comes in at around 0.7460 So offers at 0.7450 layered up are to be expected.

The daily chart shows the breaks in a little more detail. The red line along the bottom is the monthly trend line from the bottom of the market back in 2008. Now chart purists on the monthly might consider it broken but I would suggest a false break.

So how am I going to trade this. Well I got stopped out of my short on Friday from 0.7230 when the price hit 0.7320. So, what’s my strategy now? Well, I’ve scaled in longs from opening spot, smallest size. I will add at pullbacks down to 0.7255. My stops are in place down around 0.7230. I will manage and nurse these trades as the conditions dictate. For this trade to be successful a few things need to fall into my favour. USD coming off its highs, China to continue to keep the taps open and data to continue showing resilience. The RBA probably won’t act in raising rates for a good while due to the high level of debt and hot housing market. However, if the rest of the data continues to pick up they might have to act in a small way. That will set a fire under the PA.

I will continue to give updates on this position in Forexflows premium trading room.

David Terrell

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