Commodity currencies have been performing well.

My signal on 11^th May might have produced a losing long trade from the bullish outside candlestick which rejected the support level I had identified at 0.6926.

Today’s AUD/USD Signals

Risk 0.75%

Trades may only be taken before 5pm Tokyo time Wednesday.

• Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7227 or 0.7275.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

• Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7162 or 0.7125.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

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 on 11^th May that the odds still favoured bears over bulls, but it seemed that the next major movement would not come until after the day’s US inflation data release and would be quite dependent upon it. This was a good call as the price continued its downward trend after the release.

The technical picture now is quite different, as we have seen the US Dollar weaken for almost three weeks, with the Australian Dollar one of the major gainers – the Aussie typically acts as a risk barometer, and we are seeing improved risk sentiment.

However, it remains true that the bullish price movement of the past few weeks is hardly a long-term trend and remains prone to a reversal. Yet until some data emerges to trigger that reversal, we are likely to see bulls continue to have the upper hand in this market.

I therefore think the best approach today in this currency pair will be to look for long trades.

The support level at 0.7162 looks to be an attractive entry point if the price gets back there and makes another bullish bounce.

Concerning the AUD, there will be a release of GDP data at 2:30am London time. There is nothing of high importance scheduled today regarding the USD.

We expect the index to return in its upcoming trading.

The Dow Jones Industrial Average declined during its recent trading at the intraday levels, to record losses in its last sessions, by -1.19%, to lose the index towards -413.04 points. It settled at the end of trading at the level of 34,308.09, after rising by 0.40% in Friday’s trading.

Twenty-six of the index’s 30 components declined in trading on Monday, with the decliners being the most, by percentage, Microsoft Corp. by -3.94%, and American Express Co. by -3.34%, followed by Cisco Systems Inc. by -2.58%.

Technology stocks were pressured by higher bond yields, with the yield on the 10-year Treasury rising 6.6 basis points, or 2.78%, the highest since Jan. 18, 2019, according to market data from Dow Jones.

The 30-year index rose by 7.5 basis points to 2.82%, the highest level since May 21, 2019. The 10-year and 30-year interest rates rose for their seventh and sixth trading days, respectively.

Returns move in the opposite direction to prices.

Higher bond yields are a headwind for stocks especially technology stocks and other stocks whose valuations are based on expected earnings and cash flow far into the future. Higher yields on risk-free treasuries mean those future inflows are less valuable in present value terms.

Technically, the index based its recent decline on the support of its simple moving average for the previous 50 days, in an attempt to gain positive momentum that might help it recover and rise again. This is with the dominance of the main bullish trend in the medium term, with the beginning of a positive crossover in the relative strength indicators, after it reached oversold areas. It reached in an exaggerated way compared to the movement of the index, but in front of that the corrective bearish trend dominates over the short term, as shown in the attached chart for a (daily) period.

Therefore, we expect the index to return in its upcoming trading, as long as the main support 34,000 remains intact, to target the important resistance level 35,372.26.

The United Kingdom is now one of the most affected countries by the advance of the coronavirus pandemic in Europe, with 634,920 total cases as well as a death toll of 43,018.

So far this week, the pound sterling has lost 1.16 percent against the US dollar, breaking a two-week gaining streak ahead of an EU leaders’ summit that took place on Thursday and Friday.

The EU leaders are set to discuss the Brexit negotiations and are expected to give instructions to the EU Chief Negotiator, Michel Barnier regarding which steps he should take in order to advance with the negotiations, as the year-end deadline approaches. The media has reported that they plan to say that the progress in talks with the United Kingdom is still not sufficient to reach a trade deal and that they’re instructing the Chief Negotiator to intensify the talks with the British government, they may be discussing which concessions they can make to the United Kingdom for the sake of advancing with the negotiations.

Britain insists on barring EU members from its fishing waters, a proposal that is considered outrageous given the United Kingdom’s aspirations to stay within the EU’s energy single market. About this issue, the German Chancellor, Angela Merkel commented that the European Union would need to be more “realistic” in compromising on fishing rights, highlighting that reaching a deal should be in the interests of both parts. Moreover, progress on talks about trade and security issues are now essentially stalled, which adds pressure.

The United Kingdom is now one of the most affected countries by the advance of the coronavirus pandemic in Europe, with 634,920 total cases as well as a death toll of 43,018. Given the recent surge in the number of cases, Prime Minister Boris Johnson announced a new three-tier restrictions system. Most of the country is currently on the lowest tier, though places like the Liverpool region will have to face the toughest restrictions.

On Monday, the Bank of England’s Governor, Andrew Bailey commented that the British economy could struggle more than expected to recover from the effects of the sanitary crisis in the economy.

“We think the risks, unfortunately, are all on the downside,” he said during a question and answer session. On Tuesday, after he was asked if the bank was planning to do so,  he added that for now, the bank is not discussing whether imposing negative cash rates, so currently, the bank’s monetary policy committee is not in a position to say if it is a tool they would employ.

Bailey’s claims come after the Bank of England policymaker, Jonathan Haskel said that the bank has an open mind about the possibility of cutting cash rates below zero, adding that despite the fact that it could affect the banking system’s profits, the measure could have a positive effect on the British economy as a whole.

The British Retail Consortium reported that retail sales rose by 6.1 percent in September (year-to-year), lower than expected, as the surveyed analysts foresaw it to rise by 8.2 percent, but higher than August’s figure, which stood at 4.7 percent.

On Tuesday, the Office for National Statistics recently reported that the Unemployment Rate from June through August 2020 stood at 4.5 percent, rising more than expected and higher than the previous period final number. The claimant count rate rose by 7.6 percent in September, while the number of unemployed people went up by 28,000. Average earnings remained unchanged in the three months to August, after dropping by 1 percent in the previous period. Excluding bonus, average earnings gained 0.8 percent, after going up by 0.2 percent in the previous period.