Why I think the Australian Dollar is poised to trade lower

Dave Floyd is a professional FX and stock trader based in Bend, OR and the
President of Aspen Trading Group. Dave’s approach to FX combines technical
and fundamental analysis that results in trades that fall into the swing
trading time frame of several hours to several days. For a free trial to
Dave Floyd’s Daily Forex Alerts

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One on my favorite pairs to trade is AUD/USD as well as the
Australian Dollar crosses. The relative smoothness of the price action and lack
of erratic intra-day movements make this one ideal to play from a short to
medium-term time frame (1-3 day trade duration).

Last weeks move higher off oversold conditions at the .7000 level in the
Australian Dollar have provided us with an opportunity for a short. This trade
makes sense on several fronts:

– We are looking to establish a trade within the general trend — down

– Several resistance levels are coming together providing limited downside if
our analysis proves incorrect

– The gains relative to the stop-loss are excellent

The key reason why I suspect that AUD/USD will trade lower is simply based on
the daily chart.

Australian Dollar

Secondly, the 60-minute chart confirms many of the same attributes, i.e.
shorting into resistance, shorting into failing momentum.

Australian Dollar

If there are any drawbacks to this trade it is simply due to market conditions.
Trading volumes remain light and with the Easter/Passover holiday’s approaching,
liquidity will continue to lighten. This can always lead to abnormal and erratic
price action.

The following is a note that I sent to clients this morning regarding the
current market conditions:

“Unfortunately, it appears that the data was still not ‘clear’ enough to warrant
a solid move up or down in the dollar. As mentioned previously, this market is
so data dependent presently, which is going to need a few pieces of data that
are far from consensus in order to shake this market up.

With the Easter/Passover holiday nearing, expect traders to add little risk to
their books – hence, potentially very little price action. Stay tuned.”

As always, feel free to send me your comments and questions.


Aspen Trading Group