AUD/USD Analysis: How to Use Forex Pair Resilience
The AUD/USD currency pair has been experiencing a bullish trend lately. Reason – the recent surprise rate hike by the Reserve Bank of Australia. However, the pair is currently facing resistance levels packed quite closely together above $0.6712 until $0.6744. It may cause difficulties for the price to advance further in the short term. In this article, we will explore short and long-trade ideas for AUD/USD.
Short Trade Idea
Traders aiming to short the AUD/USD could consider entering the market on a bearish price action reversal at $0.6847 in the H1 time frame. It’s advised to set the stop loss 1 pip above the local swing high and adjust it to break even once the trade gains 20 pips. When the position reaches 20 pips in profit, it’s recommended to take off 50% of the position as profit and leave the rest to run.
Long Trade Ideas
To find long trading opportunities, consider entering a bullish price action reversal on the H1 time frame when the AUD/USD touches $0.6768, $0.6744, or $0.6705. Place a stop loss 1 pip below the local swing low and adjust it to break even once the trade gains 20 pips. When the price goes up by 20 pips, take off 50% of the position as profit and let the remaining part run.
Identifying Price Action Reversals
To spot a traditional “price action reversal,” traders should observe an hourly candle’s closure, which could be a pin bar, a doji, an outside bar, or an engulfing candle with a higher close. Traders can take advantage of possible trading chances by monitoring the price action that takes place at these levels or zones.
AUD/USD Technical Picture
The technical picture for AUD/USD is broadly bullish, both in terms of the wider market and the market for this particular currency pair. The general weakness in the US Dollar, along with the recent lower-than-expected US CPI (inflation) data, is reinforcing the risk-on rally, which is boosting riskier currencies like the Australian Dollar.
The specific bullish technical factors for AUD/USD are:
- The price fits within a symmetrical bullish price channel, as shown in the chart below.
- A confluence of two support levels with the lower trend line of this channel. Additionally, the half number at $0.6750 may play its role.
- A bearish inflection point occurred recently at $0.6815, but there is no significant resistance level until $0.6847. This suggests that there is potential for the price to increase, with the path of least resistance appearing to be upward.
Trading Opportunities
Considering the bullish trend for AUD/USD, it might be advantageous to search for opportunities to enter long trades. The trading area may vary from any firm bullish bounce at either $0.6768 or $0.6744. However, traders should keep in mind that there will be a release of PPI data at 1:30 pm London time. Potentially, it could majorly impact the USD. As for the AUD, there are no high-impact events on the schedule for today.
