Day one: potential AUD/USD trade

Our potential trading strategy this week is to sell AUD/USD 0.9270, with stop loss at 0.9315, and a potential target of 0.9155.

After a period of trading sideways, AUD/USD could be ready to see a more pronounced downwards move.

The year’s uptrend gave away at 0.9300 last week and the short-term moving averages are headed lower. This has also been complimented by the MACD, which has not only crossed below the signal line, but also the zero level.

Stochastics on the daily chart are at low levels, but this is testament to the weakness in the price; looking at this oscillator through November to December, when it falls below the twenty level it can have long periods of weakness.

Support is seen at the May 2 low of 0.9203, so a break of this level will suggest downside to the 200-day moving average at 0.9170 and on to my potential target of 0.9155 (the 38.2% retracement of the rally we saw at the start of the year).

Traders could look to place a stop loss just above the 50% retracement of the recent sell-off from 0.9409 in case the trade goes against me.

I am keen to trade with the short-term trend, but would look for a very modest rally to sell into (spot at the time of writing 0.9237).

Fundamentally, we are seeing a moderation in the strength of Australian data, notably in the recent Q1 wage data, while consumer confidence also nose-dived, with the budget clearly an influence.

IG Charts

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