Purely Technical: Attempting to Ride AUDUSD

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AUDUSD Technical Analysis

Although shorting the Australian Dollar (AUD) means incurring negative interest at the rollover, the monthly chart suggest the current bullish wave is temporary and may not hold for a substantial period of time.

AUDUSD Monthly Chart

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The top Head-And-Shoulders (H&S) has triggered the heavy selling in AUDUSD since the neckline was penetrated by the market. The recent dip is merely corrective before a resumption of the downtrend. The 21 Moving Average (MA) is likely to cap any bullish attempts as at the monthly close as 0.7590 acts as the nearest resistance.  Although such entries may only be affirmed at the monthly close, the negative divergence that is noted in the Relative Strength Index (RSI) in the daily chart may suggest the bearish retracement may be seen prior to the monthly close.

In order to derive the target for the anticipated retracement we are using the weekly chart as we have little desire in opting for a monthly target due to the negative interest.

AUDUSD Weekly Chart

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There may be several triggers for AUD weakness in the Forex market. The best scenario would be a further intervention of the People’s Bank of China (PBOC) that have softened AUD in the past. We have deliberealy released the trade alert after the daily close in order to avoid the negative interest.

AUDUSD Trade Alert Details

AUDUSD short at market price (0.7576)
Take profit: 0.7230
Protective stop: 0.7720
Risk Ratio (RR): 1 : 2.9 (approx.)
Estimated duration: 14 days

23/03/16 UPDATE:  We debated yesterday whether to increase our AUD exposure in GBPAUD as an entry was provided, however, we are adopting extreme caution. We may issue a new trade in GBPAUD after the London close but it is too early to determine at the time of this writing such action will indeed take place. No action is taken to the current trade in AUDUSD.

23/03/16 UPDATE II: AUDUSD is trading at 0.7521 at the time of this writing.

Please click on the chart to enlarge:

We prefer maintaining a greater distance from the market before shifting the protective stop to the entry but we are closing 20% of the long trade at market price to reduce the holding costs of the short trade.

24/03/16 UPDATE: AUDUSD is trading at 0.7483 at the time of this writing. We are closing 20% of the short trade at market price and shift the protective stop to the entry.

Please click on the chart to enlarge:

We are uncertain whether we will issue a short trade in GBPAUD as there is a strong possibility the bullish boat has sailed without us.

01/04/16 UPDATE: Following Yellen’s speech USD was heavily sold in the Forex market. AUDSUD triggered the protective stop that was layered at the entry, ending the trade with a fair profit due to the partials’ realization.

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