AUD/USD: IT CANNOT GET OUT OF ITS OWN WAY!

Almost at the end of the month, just Monday’s trading to complete month 5 of 2021. I think most of the month end moves happened last Friday, there was certainly a demand for the USD as markets opened in North America.

From my own trading perspective thru THE WEEKLY FX PREMIUM, it was a fairly good week with some nice trades with pips into the month end. If you are interested in this subject Section 3 is where you need to go!

1. WHAT CURRENCY PAIR HAS MY ATTENTION and WHY?

1.1: BACKGROUND TO MY TRADING STYLES:

Over the past few weeks I have received several emails etc. asking me what my process is for posting a trade. With this feedback in mind, over the coming weeks I am going to run through my process with a particular currency pair in mind, looking at all the stages I take into consideration.

Please bear in mind, I am a long-term trader with longer-term horizons so my process will be completely different to scalpers, range traders and some day traders.

Essentially, I am a “Swing Trader” looking for trades to develop. This style of trade for me I refer to as “Radar Trades”, with a time horizon of hopefully a few days or weeks, to a few months.

However, currently, I am looking deeper and looking to trade over a longer period of time. This type of trade style I call “(Core) Position Trades” and depending upon my conviction and market conditions, trades that I believe are longer-term over 9-12 months duration, these trades become a multi-positional (Core) Position trade.

1.2: THE POTENTIAL TRADE:

AUD/USD: IT CANNOT GET OUT OF ITS OWN WAY!

Commodity currencies have always been my favourite currency pairs to trade. When TRUMP became President that focus waned a bit and now in the post TRUMP era, my interest has been renewed once again, although, I have been trading via cross rates more than pairs directly involving the USD.

Of late, observing, rather than trading (too much), the AUD/USD has really struggled to move higher given the fact that stock markets and commodities have been rising. In fact, as we all know, equity markets around the globe are at or almost at all-time highs, yet the AUD/USD cannot rally to save itself, IT CANNOT GET OUT OF ITS OWN WAY.

The best way to show this are two comparable charts. Below I have added the S&P500 and AUD/USD weekly charts for comparison, they all contain a few thoughts and comments.

So, we can see clear divergence on the charts. I realize that we are at a month end and therefore moves at the end of last week have been a little distorted but nevertheless we have a trend to consider.

1.3: FUNDAMENTALLY:

The AUD/USD looks tired around 0.7820 / 0.7850, and it has underperformed against equities, which usually provide a correlation between this currency pair and the equity market.

Support is strong initially at 0.7675 last Friday’s lows, which coincides with lows from 3 of the past 4 weeks. Obviously, a break lower through this level and 0.7520 becomes a medium-term bear objective.

BULLS do not in my opinion assume control again until the triangle resistance trendline is broken. It currently sits at 0.7865. This means, we would need a breakthrough my “tired” levels of 0.7800 / 0.7820 to make sure and confirm the move. In addition, we have a BEAR CHANNEL also in play and to break the BEAR CHANNEL resistance a move through 0.7775 would be required.

Lots of numbers and lots of ifs ands and buts for this pair at the moment.

1.4: TECHNICALLY:

Until we break the triangle range of 0.7675 through to 0.7865, we are rangebound, in spite of the BEAR CHANNEL resistance of 0.7775.

I believe the triangle support and resistance levels offer better choices for any trades to use as guidance and RISK projections.

We are consolidating and at the same time failing to correlate with what would normally be supportive moves higher in the equities market.

There is a trade here it's a question of being patient.

1.5: THE MACRO CENTRAL BANK PERSPECTIVE:

RESERVE BANK OF AUSTRALIA (RBA) & FEDERAL RESERVE (FED):

Subscribers to THE WEEKLY FX PREMIUM will know I place a lot of thought with my trading about how Central Banks review moves in their currencies.

The RBA meets on Tuesday this week with its latest Monetary Policy Decision. In the past Philip Lowe, RBA Governor, has indicated a preference to see hard facts before making a move to change Monetary Policy. This stance is 100% that of the FED.

The RBA has a “White Hot” housing sector, especially in Sydney to cope with and recent incentives with the Homebuilder program are working but at what cost?

Are new builds simply being brought forward?
Are build costs inflated due to supply issues?
Has this effected the unemployment statistics as expected?
Density builds (more affordable), these projects have largely stagnated

It would be remarkable if Lowe tapered the existing QE policy in place. This would effectively be tantamount to an interest rate increase and frankly that would crucify any chance of a sustained economic recovery following Covid-19 (The RBA Quantitative Easing (QE) program is currently AUD$5Billion per week).

So, with both banks basically in alignment “Not wanting to stir up anything” one would believe that the AUD/USD should move higher as the FED continues to want to sacrifice the USD in favour of supporting Wall Street.

1.6: THE CHARTS:

DAILY CHART:

I have written my thoughts on the chart below.

1.7: SUMMARY:

My thought process with this pair is quite clear and I have alluded to it a couple of times already.

My BIAS to trade is BEARISH but....
I want to let the AUD/USD do its own thing and show me the way.
I would like to see a break of 0.7675 to the downside and a DAILY close below that level.
At that point I would be short using the previous support of 0.7675 which would now be resistance as part of RISK ASSESSEMENT for the trade.
It is quite clear you know your RISK as soon as you enter this trade.

What’s next?

Obviously it is lining up my trade parameters, but....

Sorry everyone, but that is between my WEEKLY FX PREMIUM subscribers and me. If you want to know subscribe and join.

2. FOLLOW UP ON RECENT PREVIOUS POSTS:

2.1: CURRENCY PAIR
USD/CAD:
DATE: 16^th May 2021
BLOG REFERENCE: #412 FREE NEWSLETTER VERSION

The initial trade that I posted in the blog last weekend, (FLA024) I covered for +75 pips. Below, I show my twitter feed that was used to advise WEEKLY FX PREMIUM subscribers of my actions from the start of the trade through to its completion.

I also launched a CORE POSITION trade with this pair. So far, I am -40 pips on two completed trades and currently I am holding one live trade in play, which after last Friday’s volatile close to the month sits around breakeven.

I am happy to add based upon my fundamental thoughts about the CAD into the year end of 2021. So far, the move lower through 1.2000 just has NOT happened as I thought it would have. This is concerning BUT it has not spiked higher past 1.2150 / 1.2200, so I sit and wait patiently.

Holding and waiting to add.

2.2: CURRENCY PAIR
GBP/USD:
DATE; 23^rd May 2021
BLOG REFERENCE: #413 FREE NEWSLETTER VERSION

Not too much has happened of late. This break broke through 1.4200 but then pulled back on demand for the USD.

I have had a CORE LONG POSITION in play since 5^th January 2021, so far with 21 completed trades providing +1,451 pips for average pip return per trade of +69 pips.

I still see fair value well beyond the current price and, therefore, I am happy to hold. I remain BULLISH on the GBP as a whole and I am happy to continue to buy dips.

3. THE WEEKLY FX PREMIUM - PERFORMANCE:

3.1: THE WEEKLY FX PREMIUM: MONTHLY PERFORMANCE:

3.2: THE WEEKLY FX PREMIUM: SUBSCRIPTION INFORMATION:

The WEEKLY FX PREMIUM is my subscriber-based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.

Further information about how to subscribe to the WEEKLY FX PREMIUM is also located at the top of my welcome page at https://www.weeklyfxdrivethru.com under the “SUBSCRIBE” tab.

4. CLOSING THOUGHTS:

Finally,

Always remember longevity in Forex trading can only be achieved through trading with good RISK, TRADE and HEAD MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility. Trade with a TRADE PLAN, basically, plan your trades and Trade your Plan.

Mental toughness is key, and this is all about emotional control. Your mind can do amazing things, but only when it wants to, threat and alert will get your mind’s attention.

“Everyone has ability. It always comes down to mind games. Whoever is more mentally strong, wins” – Mohammed Ali.

Finally, be GRATEFUL for your wins and COUNT THEM. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.

Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator
https://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #414 FREE NEWSLETTER
DATE: 30th May 2021