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Today’s Trading Edge: AUD/USD – Bearish Butterfly May Signal Reversal

Posted by Edward Moya on Aug 28, 2014 8:21:00 AM

WWM AUDUSD AUG 28 2014

Last week, I wrote about how the RBA Minutes release may keep investors’ expectations for rates to remain steady for quite some time.  Price has since then been fairly bid for the Australian currency, but the gains have so far been capped by key trendline resistance and a potential bearish butterfly pattern. 

The daily chart on AUD/USD shows that since forming a bullish Gartley pattern around the .9240 level, price has been fairly stable despite strong gains made by the US currency against its other major trading partners.  If price is able to close above the both the 50- and 100-day SMA, price may climb higher towards the .9480 region. 

The central bank fundamentals (RBA wants a lower currency and the Fed is removing stimulus as the US economy strengthens and thus providing a positive backdrop for a stronger USD) still support for a lower Aussie dollar.    To the downside, the .9220 will provide key support for the pair.  A daily close below here and price may aim for the 50.0% Fibonacci retracement of the 2014 low to high move at .9081. 

The trade: Sell AUD/USD at .9360 with a stop loss at .9410 and a take profit at .9260.  The Risk/Reward Ratio is 1:2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

Topics: AUDUSD, aussie, aud, Aussie Dollar, aussie trading

 

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