Forex Signal: Range Support Bounce for AUD/USD – Aug 6, 2014

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Forex Signal: Range Support Bounce for AUD/USD - Aug 6, 2014

AUD/USD recently broke below the short-term support area on a smaller range and may be poised to test the bottom of the larger range visible on the 4-hour forex time frame for a forex signal bounce. Price has traded below the .9350 area and made a small pullback before resuming its drop.

If you’re looking to catch a short forex signal trade, you can sell at market and aim for the bottom of the 4-hour range at the .9220 mark. If you’re bullish on AUD/USD, you can wait for a forex signal at the actual test of .9220 and for stochastic to cross out of the oversold area before going long.

A long trade might offer a better return on risk, as a tight stop and a target at the mid-range area of interest could yield as much as a 3:1 return on risk. Aiming for the top of the range might also work out but it would be prudent to adjust the stop to entry once price tests the .9350 zone.

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Forex Signal Forecast

Risk aversion is weighing on the higher-yielding Australian dollar for now, which might lead to enough selling pressure until a test of the range support. At the same time, bleak employment data from New Zealand and a downbeat dairy auction could also drag AUD lower.

Bear in mind though that the RBA decided to sit on its hands in the latest interest rate decision, citing that there is no need to change policy just yet. Inflation reports from Australia recently came in line with expectations and was enough to boost the annual CPI to the upper half of the central bank’s target range.

Employment data is up for release from Australia later on this week and a strong showing could lead to more gains for the Aussie and a potential bounce up to the middle of the range.

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.