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AUD/USD Trading Strategy for the week 20 - 24 Jan 2014

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AUD/USD Chart 20 Jan 2014
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Can the Australian dollar drop further?

In our opinion this is just what might happen to the Aussie as we are entering a new phase in its downward trend after the summer lows have been breached. We would buy puts at 0.8825-30 on a daily basis, while we stay cautious about incoming data that can influence the price.

The Australian CPI data

The biggest data release for the week is the Australian CPI data that will bring us some big trading opportunities and the Chinese Manufacturing PMI released by private bank HSBC. Those will be released on Wednesday and Thursday.

What can we do now? Well our strategic lessons are here to provide you with some ideas. Today the price has consolidated for the most part of the day, finishing trading just above 0.88 at the end of London trading. Since the US market is closed it has been a slow session after that.

We don't expect much more from the current session, but Asia should push back with more liquid flows and trigger some new moves across the forex market. Whether or not we will get our level to start playing at it is up to the market players, however we can not recommend to buy puts before we see a test of the 0.8825-30 area.

Turning our attention to the broad market analysis we can figure out that the next obvious support to the downside is at Friday's daily lows at 0.8756. Most likely we will manage to see a substantial drop if that level falls and volatility comes back to the market.

The key here is that the Australian dollar has not been trading so low since August 2010. We are firm believers that the Australian currency has seen its best days for a while and the dependency on the Chinese economy will play a crucial part in the substantial decline that follows.

Stay tuned to the comments section below as we continue exploring the opportunities that this pair offers to the market players.

Comments

Matt T.'s picture

Our call from last night was spot on the money unless we see some kind of a dramatic reversal in the coming hours which we sincerely doubt. In fact negative Chinese news keep flowing and we think that this will keep impacting the Australian dollar. For now we frankly believe that any major reversal is out of the question. If you have missed the train an eventual pullback to 0.8730 might just work well for you to buy daily and weekly puts. Happy Friday and enjoy your trading!AUD/USD Chart 24 Jan 2014

Matt T.
Matt T.'s picture

The dog of the forex market - that's how the Australian dollar looks these days. After the rally yesterday very negative Chinese data has caused an enormous sell-off. We are looking to purchase daily and weekly put binary options on any rallies towards the 0.8760-70 area. The hourly chart looks exhausted for now and we believe that the pair might pull back up a little and consolidate. If you are not a big risk taker you could hope for 0.8780. Stay tuned!AUD/USD Chart 23 Jan 2014

Matt T.
Matt T.'s picture

Hi DarkStep we are not trading news - we prefer to wait after those come out and maybe provide us with some opportunities. We have a fundamental view on any given pair and remain flexible to acknowledge new developments in the markets. If you have more question I would be happy to answer.

Matt T.
DarkStep's picture

Hi Matthew, you trade mostly news?

DarkStep
Matt T.'s picture

Australian data overnight was very very strong and has put into a different context the expectations of the market that the Reserve Bank of Australia will cut interest rates at its next meeting. Following the release of substantially higher than expected Consumer Price Index the pair has spiked from around 0.8790 to 0.8845. Retracements have been shallow since. We will take an opportunity to buy daily calls if we visit 0.8860. the downside remains closed for now as this data is quite ground braking. AUD/USD Chart 22 Jan 2014

Matt T.
Matt T.'s picture

The key data release for the Australian dollar is incoming at 00:30 GMT. We believe that our call from yesterday will yield us good result as current prices are hovering around 0.8800. We have successfully entered our trade buying puts on a daily basis at 0.8830 and in a couple of hours if everything goes according to plan we will book a profit. For the next call we will have to wait for the release of the CPI data at 00:30 GMT. Once that is out of the way we will issue our next call. Stay tuned!AUD/USD Chart 21 Jan 2014

Matt T.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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