Last month, AUD/USD continued with its plunge and took out the .9000 price barrier, but was unable to reach Reserve Bank of Australia (RBA) Governor Glenn Steven’s preferred target of .8500.
Price action on the 240-minute chart highlights the recent stabilization of the Australian dollar as price is starting to make higher lows and higher highs. The RBA’s goal of weakening their currency to support trade-exposed parts of the economy has been working since April. With the U.S. Federal Reserve beginning with the tapering process, a resumption of the downtrend may resume once this rally ends. One key catalyst may come when we see the Minutes from the Fed’s last meeting. If more members are in greater support of the taper, the U.S. dollar may have the strongest rallies against both the Japanese yen and the Australian currency.
If price continues to rise towards the .9050 level, a bearish butterfly pattern may emerge on the 60-minute chart. Added resistance also comes the 200-period SMA on the 240-minute chart. Key downside targets include .8666 and .8500.
The trade: Sell AUD/USD .9050, with a stop loss at .9100 and a take profit at .8850. The Risk/Reward Ratio is 1:4
Edward J. Moya
WorldWideMarkets Online Trading