AUD/USD continued its losing streak for a third consecutive day as investors continue to rush to buy U.S. dollars and as U.S. Treasury yields continue, with the 10-year yield breaking out above 2.50% after trading as low as 2.30% at the end of last month. The recent surge in yields is being triggered by traders moving up their interest rate hike forecasts for the Federal Reserve.
Two weeks ago, I targeted Aussie weakness from both trendline resistance and a potential bearish butterfly pattern. Price did respect my stop of .9410 and fell through my initial target and is now trading well below the 200-, 100-, and 50-day Simple Moving Averages (SMA).
Major support for the Australian currency might target the .9080 level, which is where a bullish Gartley pattern may form. A daily close below .9050 will invalidated the pattern and could open the door for another 1.0% slide. Key resistance will come from the .9200 handle which is currently just above 200-day SMA.
The trade: Sell AUD/USD at .9180 with a stop loss at .9240 and a take profit at .9060. The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading