AUD/USD trade idea

The set-up on the daily chart had suggested a move to the bottom of the channel around $0.8370. However, the technical picture seems to have altered somewhat.

Source: Bloomberg

On the daily chart we’ve seen two bullish key day reversals in four sessions (as circled), which tells you the bulls seem in control at present. Momentum has shifted as well, with bullish crossover on the stochastic oscillator, while a crossover looks imminent on the MACD as well.

AUD/USD needs to move above the 20-day moving average at $0.8738 and we should then see the former October uptrend come into play at $0.8800. I would be looking to see how the pair behaves around this resistance – a subsequent rejection could suggest short positions. The top of the Bollinger Band is at $0.8897. However, the prospect of the pair trading in a range of $0.8800 to $0.8650 looks high for the rest of the week.

With volatility back below the year’s average at 13% (I’ve looked at the VIX index), traders are happy to hold high-yielding currencies. With the RBA continuing to hold a neutral bias, the AUD seems much more compelling to hold than the NZD. Watch out for Q3 Australian wage data at 11:30 AEDT, which is expected to remain unchanged at a 2.6% annualised pace. Adjust this for headline inflation of 2.3% and real wages are expected to be modestly positive, but 2.6% is still not going to trouble the RBA.

Click to enlarge

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.