Looking for opportunities to fit short-term rallies, 

• The AUD/USD pair has dropped during the Friday session to test the 0.69 level.
• This is a market that continues to be highly sensitive to the overall risk appetite around the world, which of course is waning.
• Pay close attention to is the fact that the Australian dollar is highly sensitive to the Chinese mainland economy, so therefore you need to keep in mind that everything that’s going on in China has a major influence here.
• The Chinese economy seems to be slowing down, and there are a lot of concerns about what’s going on over there.

If we break down below the lows of the trading session on Friday, I think it opens up the door to a move down to the 0.67 level. The 0.67 level has been important a couple of times, going back several years. If we break down below that level, then it opens up the possibility of a move to much lower levels. In that situation, I would fully anticipate that the market will go looking to reach the 0.65 level.

Change in Trend

On the alternate scenario, if we were to break above the 50 Day EMA, something that I don’t see happening very easily, the 0.70 level should be resistance, followed by the 200 Day EMA. The 200 Day EMA being broken to the upside could be thought of as a change in trend, but I would not hold my breath for that happening easily. We would need to see the US dollar loses strength across the board, although it must be noted that the Australian dollar has been a bit of an outlier when it comes to dealing with the greenback, as so many of the other currencies have done far worse than the Aussie.

I do think that this remains a “fade the rally” type of market, but that’s the same thing that you can say about most major currencies against the US dollar. As yields will almost certainly rise next week due to central bankers speaking at the Jackson Hole Symposium, I think this continues to put downward pressure on this market as the US dollar will remain King when money tightening policy continues to be the norm for most central banks. Because of this, I’m looking for opportunities to fit short-term rallies, but if we do break down below the Friday candlestick I would not hesitate to start shorting either.

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The price is more bullish above 0.6918.

My previous signal last Monday was not triggered, as unfortunately the price never quite reached the resistance level which I had identified at 0.7038.

Today’s AUD/USD Signals

Risk 0.75%

Trades must be entered before 5pm Tokyo time Thursday.

• Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.6918 or 0.7002.
• 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 0.6848 or 0.6774.
• 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.
• Remove 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.

AUD/USD Analysis

I wrote in my previous forecast last Monday that the price had just hit the big round number at 0.7000 and make a bullish bounce there. I suggested not to have any faith in this low until the price got established above at least 0.7038 or ideally 0.7063.

This was a good call as the price action turned bearish again just below 0.7038 and we have seen another strong downwards leg in the bearish trend as risky assets such as the Australian Dollar have continued to get hammered, which the US Dollar has continued to power to a new multi-year high. I was correct to take a bearish outlook.

Looking at the price chart below, it can be seen we have had a bullish retracement from the 0.6850 area but zooming out it can be said that there is nothing unusual about this bullish movement – it is proportionate with the trend and seems to be just a bullish retracement. This is reinforced by the fact that the price is still respecting the resistance level I have drawn at 0.6918.

Despite all these reasons to be bearish, today is a big day with very major news due from the FOMC, and markets will be watching keenly to see whether the Fed hikes by 0.50% or 0.75%. On big days like today, you can get major counter-trend movements after the release and stop-hunting movements before the release. Therefore, it would not be surprising if we get at least a bit of an upwards movement if the price can get established above 0.6918. This could be an opportunity today for scalpers to exploit, but any long trade should be closely monitored.

I think the best opportunity here which may set up today would be a short trade following a pull-back if the FOMC announces a 0.75% rate hike.

Concerning the USD, there will be a release of Retail Sales data at 1:30pm London time, followed by the FOMC Federal Funds Rate, Statement, and Projections at 7pm. There is nothing of high importance scheduled today regarding the AUD.

The Dow Jones index has been trading at fluctuating levels for several weeks but continues its daily decline since late last April. It fell to the level of 32444.00 points yesterday, the lowest level reached by the Dow Jones price in the last thirty days. The Dow Jones Industrial Average rose yesterday during its recent trading at the intraday levels, to achieve gains at the close by 0.20%, and gained 64 points by the Dow Jones Industrial Average. The Dow Jones Industrial Average settled at the end of trading at the level of 33,128.40, after a slight increase also in the previous day, by 0.26%, and reached the specified support level from the previous day at the price level of 32,500.00 points. The price of the DOW JONES index started to rise directly when it reached the support point.

26 components of the 30 index components rose in the last session’s trading. The list of stocks with the highest percentage gain was the Salesforce Inc. by 6.33%, followed by Merck & Co. Inc. by 4.94% after the drug company beat estimates for the first quarter, boosted by more than $3 billion in sales of COVID-19 antivirals.

Additionally, in economic news, US GDP unexpectedly declined at an annualized rate of 1.4% in the first quarter after a 6.9% gain in the previous quarter.

Initial jobless claims fell by 5,000 to 180,000 in the week ending April 23, while the four-week moving average rose by 2,250 to 179.750, the third consecutive increase, the weekly numbers were below 200,000 since mid-February, it is an indicator of labor force measurement.