AUDUSD: Breaks Under .8400 As Support Line of Longer Term Bearish Channel Reached
The daily candle chart below shows the price history of the Australian Dollar (AUD) versus the United States Dollar (USD). This currency pair is known as AUDUSD, and is trading near .8371 around time of publication today, and off session lows of .8354.
Last week when AUDUSD was last reviewed in Ideas You Can Trade, the longer term trend was kicking in and a bearish continuation was described as likely within the longer term bearish channel (point 5 in Red on chart below), and .8400 was mentioned as a target. Since then the lower support line of that channel was reached today, as the pair broke under the .8400 level for the first time since June 2010.
Unless support above .8400 is maintained the bearish trend could become worse, whereas a bullish recovery on the support line above .8400 could be short-lived.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. Bullish Buy Entry Order: Create a "Buy Entry Stop" @ .8409 with a Limit to take profit @ .8479 and a stop-loss @ .8355 Risk/Reward Summary: Limit risk = +70 pips profit / (-54) Stop-loss risk = Gain to Loss ratio = 1.29
2. Bearish Sell Entry Order: Create a "Sell Entry Stop" @ .8353 with a Limit to take profit @ .8310 and a stop-loss @ .8393 Risk/Reward Summary: Limit risk = +43 pips profit / (-40) Stop-loss risk = Gain to Loss Ratio = 1.07
Medium Term Daily Candle Chart: