The rising channel on AUD/USD’s 1-hour forex chart is still holding and it appears the pair found resistance at the .9500 major psychological level, which lines up with the top of the channel. At the same time, stochastic is moving down from the overbought zone, indicating enough selling momentum to take the pair lower in the short-term.
If you’re willing to take a countertrend trade, you could still hop in a short position until the bottom of the channel at the .9400 handle. This setup might offer a limited reward though, as the move has already taken place.
On the other hand, if you’re bullish on this pair and would like to go on a long trade, you could wait for an actual test of the channel support at .9400 and aim for the .9500 levels for a profit target. This could offer a better return on risk if you set a tight stop below the channel and wait for stochastic to turn from the oversold area before setting orders.
Long AUDUSD Idea
Recall that the RBA sounded less dovish than expected in their latest monetary policy statement. While Stevens still noted that the local currency remains high in historical standards, he also highlighted the improvements in hiring and potential gains in the export industry now that the Chinese economy is picking up steam in manufacturing.
As for the US, the latest round of reports have failed to impress. Many are already starting to price in a weak NFP reading, lending more support to a long AUDUSD idea. Perhaps the lower demand for the dollar was mostly spurred by the Fed’s refusal to commit to a time frame of interest rate hikes, unlike some major economies such as the UK.
In today’s trading session, the ADP non-farm employment change report and Yellen’s speech could be the main event risks.
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