AUDUSD Trading Strategy
Despite the expected rate cut from the Reserve Bank of Australia (RBA), the Australian Dollar (AUD) appears to be preparing for moderate gains in multiple time frames. As much as we would liked to short GBPAUD we have no technical entry and the required stop should we force a trade is substantially large. The two pairs we are focusing are AUDUSD and AUDCAD. We cannot take both trades as there is little desire to be over-exposed to a crucial fundamental event.
Both currency pairs provide us with a clean entry. We have decided to focus on AUDUSD for our trade alert as the potential Risk Ratio (RR) is greater than AUDCAD.
AUDUSD Daily Chart
Please click on the chart to enlarge:
AUDUSD Daily Chart, 05/05/15
The daily support was able to contain the weakness in AUDUSD despite the poor economic figures from China. This could mean that a bullish wave is anticipated that may carry the price beyond 0.8070 with a relatively tight stop, layered beneath the daily low. It is unclear to us whether the gains will be as a result of the RBA statement or due to the upcoming trade balance data. AUD may gain from the RBA statement if the central bank decides not to slash rates or by slashing rates as expected by 25bps but stating it will not continue its easing measures, which in such a scenario may result in moderate gains. The fact the PBOC has already slashed rates and is expected to slash over 100bps over time according to market speculations may affect the RBA decision to cut rates and remain on hold.
AUDUSD Trade Details
AUDUSD long at market price (0.7836)
Take profit: 0.8095
Protective stop: 0.7769
Risk Ratio (RR): 1 : 5 (approx.)
Estimate duration: 72 hours
05/05/15 UPDATE: The RBA slashed rates as expected but as you may note the Aussie remained firm, trading at 0.7871 at the time of this writing. We are closing 20% of the long trade at market price.
05/05/15 UPDATE II: AUDUSD spiked higher following the US trade balance.
AUDUSD 4hr Chart
Please click on the chart to enlarge:
AUDUSD 4hr Chart, 05/05/15
We are closing 10% of the trade at market price.
05/05/15 UPDATE III: AUDUSD is trading at 0.7923 at the time of this writing. We are shifting the protective stop to the entry and close 20% of the long trade at market price.
06/05/15 UPDATE: AUDUSD is trading at 0.7997 at the time of this writing. We are closing 10% of the trade at market price and shift the protective stop to 0.7895.
07/05/15 UPDATE: AUDUSD is trading at 0.7952 at the time of this writing. We are closing 10% of the long trade at market price ahead of the US unemployment claims.
09/05/15 UPDATE: With a slight delay, AUDUSD has triggered our protective stop loss order that we have shifted above the entry. We have ended the trade with a decent profit.
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Last Updated on May 30, 2015