Here is an update on our position trading strategy last updated in the weekly report. To recap, we maintained our bearish view on Aussie, but we’re not convinced regarding Yen’s strength. Therefore, we decided to switch from AUD/JPY short to AUD/USD this week. The AUD/JPY short (entered at 78.40) was closed at 79.50 at weekly open, with 110 pips loss.
AUD/USD’s is entered today on break of 0.7050. Today’s break of 0.7054 support should confirm completion of rebound from 0.6722 at 0.7295.
AUD/USD is staying inside medium term falling channel and failed to sustain above falling 55 day EMA. Both affirmed our bearish view. Further decline should be seen back to retest 0.6722 low in near term.
In the larger picture, the corrective rise from 0.6826 (2016 low) completed at 0.8135 after rejection by 55 month EMA. The dive to 0.6722 was a result of the currency flash crash earlier this year. Thus, AUD/USD couldn’t sustain below 0.6826 low at that time. But we’d anticipate a firm break of 0.6722/6826 zone with the current fall to resume the long term down trend from 1.1079 to 0.6008 and below.
To conclude, we’ll hold short in AUD/USD, with stop at 0.7125 first to give it some breathing room. 0.6722 is the first target and we’ll assess the reaction from this level to decide whether to exit. But we’re tentatively looking at 0.6008 as the point to close the trade.
