The Australian Dollar has broken below support and is showing short-term bearish momentum as it continues to fall.
My previous signal on 9th February was not triggered as there was no bearish price action when the resistance level which I had identified at $0.6988 was first reached that day.
Today’s AUD/USD Signals
Risk 0.75%
Trades must be taken prior to 5pm Tokyo time Thursday
Short Trade Ideas
- Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of $0.6957 or $0.7030.
- Put the stop loss 1 pip above the local swing high.
- Adjust the stop loss to break even once the trade is 20 pips in profit.
- Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of $0.6886, $0.6845, or $0.6790.
- Put the stop loss 1 pip below the local swing low.
- Adjust the stop loss to break even once the trade is 20 pips in profit.
- Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
AUD/USD Analysis
I wrote in my previous forecast that the AUD/USD currency pair outlook was facing a pivotal area between $0.6988 and the big round number $0.7000. I was wary of taking a shot at a potential reversal there, but a long above-the-round number could pay off in a decisive breakout.
I was correct about $0.7000 as after only one hourly close above that level, the price fell quite strongly, giving a short trade opportunity. Yet I was wrong about which direction had the better odds.
The technical picture now has become more bearish as the price has been falling quite strongly over recent hours as risk sentiment deteriorated, and the US Dollar and Japanese Yen get bid as safe havens. The more bearish market sentiment was triggered by yesterday’s higher-than-expected US CPI (inflation) data, which adds weight to a potentially more hawkish tilt from the Fed, who are now talking about more rate hikes and a longer-term hawkish monetary policy to get inflation beaten down to their 2% target.
Technically, the breakdown below the former support near $0.6950 was a bearish sign, and the price now seems to be heading for the nearest support level at $0.6886. We may see buying kick in as soon as the price reaches $0.6900. This is likely to be an area of good support, but it is hard to see how sentiment could reverse quickly today in favour of a more risk-on feeling.
For this reason, I will only look for a short trade today, from $0.6950 if the price rejects that level before touching $0.6900.
Regarding the USD, there will be a release of Retail Sales data at 1:30 pm London time. Concerning the AUD. There will be a release of Australian Unemployment data at 12:30 am.
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