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Today’s Trading Edge: AUD/USD – Extensive Downside for Composed Shorts

Posted by Edward Moya on Jun 2, 2014 9:04:00 AM

WWM AUDUSD JUNE 2 2014

Last night, the Australian dollar snapped the end of May rally after Australian Building Approvals plunged by -5.6%, the third contraction in a row.  Another key report also came out on Saturday night, when China Manufacturing PMI rose to 50.8 in May, higher than both the forecast of 50.7 and prior reading of 50.4.  The print was a five-month high and suggested that domestic demand is increasing.  The improvement in the Chinese manufacturing sector however did not produce any gains like they normally do for the country that provides China with a lot of raw materials. 

With no bullish price action for Australian dollars taking place at the open last night, it appears the currency may be poised for another major slide like the one we saw begin on April 10th.     

Price action on the AUD/USD daily chart emphasizes the key return below the 50-day SMA.  If price takes out .9173, a potential triple bottom may be invalidated and traders may see price attempt a new key low at .9063.  Major support is congregating near the 100-day SMA at .9123 and multiple Gartley and butterfly patterns around .9135 and .9064.  It is around the .9050-.9135 area we may see price stabilize.  If bullish price action is able to recapture the 50-day SMA, limited upside may target .9350. 

The trade: Sell AUD/USD at .9245 with a stop loss at .9295 and a take profit at .9145.  The Risk/Reward Ratio is a little better than 1:2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

 

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