Aussie Gains on Stronger Rate Hike

RBA hikes by 0.50%, not the expected 0.25%

My previous signal on 31st May was not triggered, as the low of that day was well below the support level I gave at 0.7162.

Today’s AUD/USD Signals

Risk 0.75%

Trades must be entered prior to 5pm Tokyo time Wednesday.

• Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7213, 0.7248, or 0.7275.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7143 or 0.7125.
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

Advertisement

AUD/USD Analysis

I wrote in my previous forecast on 31^st May that the technical picture had become more bullish, but that it remained prone to a reversal. I thought that the best approach for the day was to look for long trades.

My key support levels were off as entry points, but I was correct that the best trade for the day would be a long.

The broad technical picture in this currency pair now is one of a choppy, wide range, making trading unpredictable except when fading price extremes. This would point to a long trade from a bullish bounce at 0.7143 or a short trade from a bearish reversal at 0.7275. Technically, the support level at 0.7143 looks likely to be strong as it is so well-defined, as can be seen within the price chart below.

There is an important new fundamental factor affecting the AUD today: the Reserve Bank of Australia surprised the market a few hours ago by hiking its interest rate by 0.50% when a hike of only 0.25% was expected. This could be expected to boost the price, but although we saw an initial spike as high as 0.7245 immediately following the hike, the price quickly returned to where it started. However, the price is rising slowly again.

I think the smart thing to do will be to wait for two consecutive higher hourly closes above the resistance level at 0.7213, and then enter a cautious long trade if you want to trade this currency pair today.

There is nothing of high importance scheduled today regarding either the AUD or the USD.