AUD/USD drop as low as .7862 after the Reserve Bank of Australia minutes hinted that the Bank may resume cutting rates in May. The Minutes highlighted that the economy was still growing below trend and that we may see continued weakness with mining investments.
My AUDUSD article from Thursday correctly identified the formation of a bearish Gartley pattern that occurred only 8 pips before the .7850 level. The current three day slide for the currency pair occurs within a thirteen week-long consolidation pattern. Major support remains the psychological .7500 handle which in December, RBA Governor Stephens said that is his preferred exchange rate.
To the upside, .7913 -.7950 will serve as major resistance. If we do see a short squeeze that triggers stops around the psychological .80 handle, bearish bets may look to return around the.8150 area. By the middle of summer, we may see price attempt to test the .7000 price barrier.
The trade: SELL AUD/USD at .7710, with a stop loss at .7760 and take profit at .7610. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading