Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
The short AUDUSD trade idea that we sent two weeks ago was not triggered because the price broke the channel to the upside instead of to the downside. However, despite the strong rally early this week, the pair has now retraced about 50% of the gains after reversing on Wednesday.
Now that the rally is getting reversed, we can grow more confident that the bullish breakout was fake. Thus, a bearish breakout of the channel (below 0.70) still remains on the cards and would be a valid signal to go short on the pair.
Blow-Off Top Is An Ominous Development For AUDUSD Bulls
In a blow-off top move, the return inside the channel is a serious bearish sign, particularly also because it comes when the pair is heavily in overbought territory across multiple momentum indicators.
The technical picture will be seriously aggravated with a move below 0.70, which will indicate a bearish breakout of the channel and confirm that the bullish breakout was fake. The weekly candle already shows a solid rejection at the highs. If the week closes below 0.7020, a bearish hammer candle (shooting star) will form.
The 0.67 and 0.65 technical zones remain the primary potential targets to the downside, as we described in our email two weeks ago. 0.6700 is a big support area due to the 200-daily and the 55-weekly moving averages. If the bearish move gathers enough momentum, AUDUSD may fall even toward 0.65.
A mere 450-500 pips correction lower from the 0.7180 high to the 0.67 area wouldn’t even account for 38.2% retracement of the bullish move that started in March. This also serves to show how overbought AUDUSD is at the moment. The 38.2% Fib retracement stands closer to the 0.65 level, making this area an important support.
As an additional argument in favor of sellers, bearish divergence exists on the 1-hour RSI indicator (see chart above). However, as noted above, a break below the 0.70 level would confirm all of the bearish signs that appear at the moment.
- Breakout below the 0.70 level
Stop loss:
- Place the stop above the entry pattern or the last swing high before the breakout
- 0.70 is the line in the sand in any case; though it may return to retest it, AUDUSD should not move meaningfully above 0.70 if this trade is going to work as anticipated
Targets:
- 1st - The 0.67 area as described above;
- 2nd - 0.65 area
Note on long EURAUD: AUDUSD breaking 0.70 and accelerating the move down would also play in favor of our long EURAUD trade that was sent last week. The trade survived the stop, though the price came dangerously close to it.
Trade signals from the past week
- July 3 - Long USDCHF from 0.9460, stop triggered at 0.9360 = -100 pips
- July 10 Long EURAUD from 1.6295 (in progress)
TOTAL: -100 pips in the past week
TOTAL: +2600 pips profit since October 1, 2018
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Thank you!
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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