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Forex: Ideas You Can Trade - AUDUSD Exits Downside of Bearish Channel

Posted by Steven Hatzakis on Sep 10, 2014 2:51:00 AM

AUDUSD: Support on .9200 Failed Prompting Downside Breakout of Channel

The daily candle chart below shows the price history of the Australian Dollar (AUD) versus the United States Dollar (USD). This pair is known as AUDUSD, and is trading near .9136 around time of publication today.

In early August last time this pair was reviewed in the Ideas You Can Trade series, AUDUSD was described as still within reach of .9200 as the downtrend continued. Since then the pair persisted within the bearish channel, and reached .9200 but failed to find lasting support.

Yesterday the failure of prices to hold near .9200 - coupled with the broad US-Dollar strength seen across a number of major currencies in recent days - prompted the pair to exit the lower line of a medium term bearish channel (point 3 on chart in white color), and push lower near current levels.  

If the bearish channel can be regained, the slope of the recent momentum of the last few days could be curtailed, whereas if the current slope of the last three candles continues a steep bearish continuation could follow. In addition, the increase in volatility could cause equally large reversals. 

Below are examples of how to trade a bearish continuation or a bullish reversal:

1. Bullish Buy Entry Order: Create a "Buy Entry Stop" @.9210 with a Limit to take profit @.9239 and a stop-loss @ .9189 Risk/Reward Summary: Limit risk = +29 pips profit / (-21) Stop-loss risk = Gain to Loss ratio = 1.38

2. Bearish Sell Entry Order: Create a "Sell Entry Stop" @ .9125 with a Limit to take profit @ .9101 and a stop-loss @ .9148 Risk/Reward Summary: Limit risk = +24 pips profit / (-23) Stop-loss risk = Gain to Loss Ratio = 1.04

Medium Term Chart with Daily Candles:

AUDUSDDaily sept 10 2014 note

Medium Term Daily Candle Chart zoomed out:

AUDUSDDaily sept 10 2014 note zoomed out

Topics: AUDUSD, forex trading, technical analysis, USD, aud, Aussie Dollar, Australian Dollar

 

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