The pair remains prone to sharp downwards price movement.
Previous AUD/USD Signal
Last Week’s AUD/USD signal on Monday produced a profitable short trade from the bearish pin bar which rejected the resistance level I had identified at 0.7223.
Today’s AUD/USD Signals
Risk 0.75%
Trades may only be entered prior to 5pm Tokyo time Wednesday.
- Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7170 or 0.7188.
- 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 0.7102, 0.7083, or 0.7051.
- 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 on Monday last week last Tuesday that we had a pivotal resistance level at 0.7223 still in play. I thought that a bearish breakdown below approximately 0.7190 would complete a bearish head and shoulders candlestick pattern and suggest the price would continue to fall.
This was a good call as the resistance at 0.7223 held firmly when it was reached, giving a profitable short trade opportunity.
The technical picture has changed over the past few days, with risky assets (mostly stocks) making strong selloffs before rebounding late yesterday. This risk-off then recovery movement was naturally replicated in the Australian dollar, which is a key risk barometer currency. We saw the price plunge then bounce strongly at the support level at 0.7102 confluent with the round number. There are clear, obvious resistance levels above, with the nearest being 0.7170, which held the price just a few hours ago. The price is now trading in the middle of this range and waiting for direction. Risky assets are looking weak and prone to further falls, due to worries over the Fed’s tightening of monetary policy and the prospect of a military conflict between Russia and Ukraine. These fears are likely to determine whether the price eventually breaks below 0.7100 and continues to fall, or whether we start to see a gradual recovery and rise.
I would be happy to take a short trade from another bearish rejection of 0.7170, or a long scalp trade from another bullish bounce at 0.7100, but such a scalp should be carefully monitored on a low time frame.
There is nothing of high importance scheduled today concerning either the AUD or the USD.
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