On Saturday, Chinese Trade Balance figures were released and optimism may be returning to the second largest economy in the world. Exports jumped more than 48% in February from a year earlier, while imports plummeted 20.5%. The big imports miss to Australia’s largest trading partner helped AUD/USD gap lower to start trading week. Many economists however are shrugging off the imports miss because the week-long Lunar New Year holiday gave manufacturers incentive to hold off on raw material purchases.
The 30-minute AUDUSD chart shows that last night a bullish ABCD pattern formed from the .7683 low. The quick rally however appears to have tentatively respected the 23.6% Fibonacci retracement level of the February high to last night’s low move. If we do see the Aussie climb higher this morning, key resistance will come from the 38.2% Fibonacci level at .7745.
In the event, we see a temporary pause in USD strength, we could see 50-day SMA, which is currently at .7923, provide critical resistance. Downward targets may eventually include the .7500 handle, followed by the .7000 price barrier.
The trade: SELL AUD/USD at .7740, with a stop loss at .7790 and take profit at .7640. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading