Last night, AUD/USD rose as much as 1.6% as RBA Governor Glenn Stevens baffled some economists by keeping rates steady at the record low 2.25%. Further easing by the Bank is still expected, so we may not see a strong bullish stance form here.
The 30-minute AUDUSD chart shows that last night’s rally maxed out at .7710 and has since then given up 61.8% of its gains and tentatively formed a bullish Gartley pattern. The dovish RBA statement will continue to support the argument for targeting fresh lows and eventual breach of the Governor’s preferred exchange rate of 75 cents.
In the event, we see continued Aussie dollar strength, the 50-day SMA, which is currently at .7746, will provide immediate resistance. The psychological .80 handle will serve as both a price barrier and a possible entry for a long-term short trade. Downward targets include the .7500 handle, followed by the .7000 level.
The trade: SELL AUD/USD at .7660, with a stop loss at .7710 and take profit at .7560. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading