Trading Signals:
- Risk Management: Limit risk to 0.75% per trade.
- Trading Window: Trades should only be entered before 5:00 PM Tokyo time on Friday.
- Strategy: This analysis focuses on trading price action reversals at key support and resistance levels.
- Important Note: A “price action reversal” is identified by specific candlestick patterns forming on the hourly (H1) timeframe. These include pin bars, dojis, outside bars, and engulfing candles with a higher close (for bullish reversals) or a lower close (for bearish reversals).
Short Trade Setup:
- Entry: Initiate a short position upon a bearish price action reversal at the following potential resistance levels:
- $0.6192
- $0.6207
- $0.6218
- Stop Loss: Place the stop loss 1 pip above the high of the local swing point.
- Profit Target Management:
- Move the stop loss to breakeven once the trade is 20 pips in profit.
- Close 50% of the position for profit at 20 pips. Allow the remaining portion of the trade to run, while being mindful of other potential technical support/resistance zones.
Long Trade Setup:
- Entry: Initiate a long position upon a bullish price action reversal at the following potential support levels:
- $0.6166
- $0.6126
- $0.6102
- Stop Loss: Place the stop loss 1 pip below the low of the local swing point.
- Profit Target Management:
- Move the stop loss to breakeven once the trade is 20 pips in profit.
- Close 50% of the position for profit at 20 pips. Allow the remaining portion of the trade to run, while being mindful of other potential technical support/resistance zones.
AUD/USD Market Analysis:
Last week, we highlighted the likelihood of further declines in the AUD/USD pair due to the established long-term bearish trend, the weak Australian Dollar, and the strong US Dollar. This outlook has proven correct, as the price has continued to fall. While a short trade setup at $0.6300 did not materialize, the overall bearish trend remains intact.
The fundamental landscape continues to favor further downside pressure on the AUD/USD. The US Dollar maintains its strength, while the Australian Dollar faces persistent weakness. This is partially driven by recent Australian inflation data, with the Consumer Price Index (CPI) rising to an annualized 2.3%, and disappointing sales data further impacting sentiment.
The price action is rapidly approaching a 4-year low near $0.6170. A break below this level could signify a significant bearish move, potentially leading to a price drop towards the psychologically significant level of $0.6000.
Technical analysis, supported by a long-term linear regression analysis, indicates a consistent and steep bearish trend. The price action remains contained within the 2 standard deviation boundaries of this indicator, reinforcing the downward momentum.
While there is potential support around $0.6170, the overall market context strongly suggests continued downward pressure.
We will actively seek to enter a short trade upon a bearish price action rejection of $0.6192.
Upcoming Economic Releases:
There are no significant economic releases scheduled today concerning either the Australian or US economies.
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