Forex Technical Update

Previous: AUD/USD Continues to Push Lower; 1.06 is Consolidation Support (3/5)



AUD/USD had broke below a consolidation support at 1.06, essentially completing a double top seen in the daily chart. The breakout target using the width of the pattern projected in the direction of the breakout from the point of breakout, points toward 1.0350. The 200-day simple moving average is near 1.04. Breaking below 1.06 therefore opens up at least 1.04.

In the daily chart the RSI is testing 40, a break of which confirms the loss of bullish momentum. Will this lingering bullish momentum give the market a pullback?

The 4H AUD/USD chart shows the market a bit oversold, and does suggest a pullback as the market finds support at 1.0507. A pullback should not break above 1.0715. Therefore, a pullback toward 1.07 (61.8% retracement of the 1.0816-1.0507 swing) can give the fade on a rally trade plan a good reward to risk.

Reward to Risk (R/R) for a Trade Plan to Fade a Pullback:

From 1.07, a stop of 1.0735 gives 35 pip risk, and a target of 1.04 is a 300 pip potential reward. This is a 300:35, or 8.5:1 reward to risk.

However, we can't always expect a 61.8% retracement. What if there is only a 38.2% retracement back to 1.0625? If we see signs of resistance here, an entry at 1.0625 would have 225-pip reward to 111-pip risk, slightly better than 2:1.

Then if you plan for both entry, it would average out to be about 1.0665. This has a 265:70 or 3.7:1 R/R.

Fundamental Factors/Risks:

Q4 GDP in Australia came out to 0.4%, undershooting expectation of 0.7%. The previous quarter's figure was revised down from 1.0% to 0.8%. This puts pressure on the Aussie.

3/9 Non-Farm Payroll will be crucial for risk sentiment and direction of the USD. A better than expected jobs data can actually deter USD-strength. February's data is forecast to be 204K, after January's data showed 243K jobs added.


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Fan Yang CMT is a trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.


Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.