Wide Bearish Price Channel Forming

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Commodity currency strength may still lift Aussie beyond 0.7816.

Last Thursday’s AUD/USD signals were not triggered, as none of the key levels identified were reached that day.

Today’s AUD/USD Signals

Risk 0.75%

Trades must be taken before 5pm Tokyo time Wednesday.

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7776 or 0.7816.
  • Place 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

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7729, 0.7715, 0.7696, 0.7673.
  • Place 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.

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AUD/USD Analysis

I wrote last Thursday that this currency pair was in a very weakly bullish consolidation between roughly the support at 0.7696 and the resistance at 0.7816. Therefore, I was only prepared to trade reversals from either of these extremes, should they set up.

This was a relatively good call as the price bounced heavily after breaking below 0.7696 and then rebounding strongly within an hour.

The technical picture is looking more bearish now as the chart below shows we are starting to get a wide bearish price channel forming. However, the price will have to remain below the upper trend line which it is currently touching for this to remain valid, so this price channel could be invalidated very quickly. If the upper trend line holds, we are likely to see a more significant downwards movement in the price, so a bearish reversal there might be a good short trade entry opportunity.

On the bullish side, I would not want to be long of this currency pair until the price can get established above what has been a very pivotal resistance level recently at 0.7816.

It is worth noting that other commodity currencies such as the NZD and the CAD are relatively stronger than the AUD. This suggests the AUD is suffering from relative weakness, strengthening the bearish case on the AUD. The RBA release a few hours did little to affect the price of the AUD as it contained no significant surprise or rate change.AUDUSDConcerning the USD, there will be a release of ISM Manufacturing PMI data at 3pm. Regarding the AUD, there will be a release of GDP data at 2:30am.

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