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Forex: Ideas You Can Trade - AUDUSD Bearish momentum may test support

Posted by Steven Hatzakis on Jul 3, 2013 9:16:00 AM

AUDUSD: Bearish momentum close to testing bullish support               

The long term chart below shows bearish momentum of AUDUSD down a steep bearish channel (point 1) and approaching a long term bullish support line which may provide a barrier to entry.

However, considering the steep slope of the existing bearish momentum and the similarity of previous steep descents over the medium term as seen in the chart below, it’s likely that AUDUSD may edge even lower to look for support along the first (point 2) of several bullish support lines which it is approaching (point 3 & 4). A strong enough bounce on either of these three lines could propel AUDUSD back up a bullish trend line similiar to historical lines (point 5) and which is highlighted on the chart as a dotted line (point 5).

Unless the bearish momentum reverses, AUDUSD may likely test along bullish support (point 2) which coincides around .9000 in the very short term and of which if failed to provide the support needed for a bounce to reverse the trend, could engender further bearish momentum with AUDUSD looking for support near .8500 and/or .8400 both of which coincide near additional long term support lines (point 3 & 4) further below.

On the other hand, at least in the short term its possible that current momentum reverses with  very short term correction to the upside to test the resistance line of the existing bearish channel (point 1) which AUDUSD has been trading within for the past few months (additional chart with zoomed in view provided below).

Below are examples of how to trade a bearish continuation if momentum continues or a bullish reversal due to short term correction to the upside. 

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .9154 with a Limit to take profit @ .9241 and a stop-loss to cut losses @ .9097 Risk/Reward Summary: Limit risk = +87 pips profit / (-57) Stop-loss risk = Gain to Loss ratio =  1.53

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .9050 with a Limit to take profit @ .8960 and a stop-loss to cut losses @ .9135 Risk/Reward Summary:   Limit risk = +87 pips profit / (-57) Stop-loss risk = Gain to Loss Ratio =  1.06

Long term view:

describe the image

Zoomed in view:

 audusddaily short term july 3 2013



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