AUD/USD Descending Triangle Forex Chart Breakout – July 31, 2014

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AUD/USD Descending Triangle Forex Chart Breakout - July 31, 2014

AUD/USD Descending Triangle Forex Chart Breakout - July 31, 2014AUD/USD had been trading inside an ascending triangle forex chart pattern for quite some time before breaking to the downside and indicating that further losses could be in the cards. Price has found a bit of support at the .9300 area and may be due for a pullback, as stochastic is starting to move out of the oversold zone.

With that, price could retreat to the .9400 major psychological handle, which is near the broken triangle support. From there, if selling pressure remains strong, AUD/USD could resume its drop and head back down to the lows near the .9200 levels

Shorting at .9400 with a stop above the top of the triangle or .9460 and a target of .9200 could yield a good return on risk for a medium-term trade.

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AUD/USD Forex Chart Analysis

Earlier today, Australia reported a couple of weaker than expected readings in its building approvals and import prices data. Building approvals reportedly fell by 5.0% versus the estimated 1.0% decline while import prices slipped by 3.0%, worse than the projected 1.4% dip.

This forced the Aussie to return some of its recent gains, which were spurred by stronger than expected inflation data. For some traders, this was enough reason to believe that the RBA is no longer looking to cut interest rates.

As for the US dollar, the currency drew support from stronger than expected GDP growth of 4.0% versus the projected 3.1% expansion. However, the cautious FOMC statement forced the dollar to return some of its recent gains.

With that, AUD/USD might have a chance at retracing to retest the broken triangle support and find more selling momentum. Take note that the chart pattern is roughly 250 pips in height, which suggests that the resulting breakdown could be of the same size.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.