The Australian currency has tentatively respected the 100-day Simple Moving Average (SMA) and formed a potential bullish Gartley pattern. If the bullish reversal pattern is valid, AUD/USD may strengthen towards .9600.
Price action on the daily chart above displays the potential bullish reversal at point D. The X to A leg confirms point D with the 50% Fibonacci retracement level, while the B to C leg uses the 200% Fibonacci expansion level. This technical reversal pattern typically will see an immediate rebound at the very least targeting point B.
The trade: Go Long AUDUSD at market (currently trading at .9295), with a stop loss at .9245, and a take profit at .9595. The Risk/Reward Ratio is 1:6.
If this is the beginning of a major bullish move, traders may decide to keep this trade going and only exit half the position if a Golden Cross is formed. That occurs if the 50-day SMA crosses above the 200-day. Traders may exit half their position at the initial profit target and set the second target at .9750 while moving the stop loss to a level just above breakeven.
Edward J. Moya
WorldWideMarkets Online Trading