AUD/USD currency reactions this week posted weak rallies despite some very impressive data points from Australia. The selloff with this pair is targeting the worst weekly loss since 1985. Solid U.S. economic releases combined with dovish comments from RBA Glenn Stevens, have helped strong bearish momentum remain intact for this pair.
This morning the .8900 price barrier has tentatively been respected with price rebounding towards .8940 after making a session low at .8908. Critical support lies at the .8847 level, which is the low made earlier this August. If price breaks below this level, the next major support level is .8542 which comes from the 50.0% Fibonacci retracement of the 2008 low (.6006) to 2011 high (1.1042).
If bearish momentum resumes and breaks past the .8900 barrier, investors may initially target .8850 region. After this next round of selling is exhausted, we may look to trade a potential rebound using a bullish ABCD pattern at .8702
The trade: Sell AUD/USD at .8885, with a stop loss at .8935 and a take profit at .8735. The Risk/Reward Ratio is 1:3.
Edward J. Moya
WorldWideMarkets Online Trading