Short-term Trading Idea FX AUD/USD – Bull Speculation: Double Bottom Receives its Confirmation

Trading opportunities for currency pair: a double bottom has come off and was confirmed on Friday when the quotes headed above 0.7390. Due to a restoral of the oil price to $38.92, the AUD/USD has risen to 0.7435. Growth of Brent to $40.50 will see the AUD/USD lift to 0.7560 (by 20^th March), if it hits 42.50 then the rate will rise to 0.7670 (by 10^th April). Any strengthening of the Aussie will be cancelled out with a close of the daily candle below 0.7230.

Background

The last Aussie dollar idea I made came out on 25^th January. At publication, it was going for 0.7003 against the USD. Back then there was a candle formation of bull divergence on the weekly which was an Aussie buy signal. The candle model and the double bull divergence came off. The AUD/USD strengthened above 0.7155 and reached the 0.7325 calculated level.

The AUD rally started on 20^th January with Brent turning around from $27.08. The growth of the quotes began after the Australian central bank kept its interest rate unchanged at 2%. The RBA confirmed that inflation would be the cause of any drop of the rate, but market participants ignored this announcement.

Fresh stats were then published. Retail sales were up, GDP in Q4 was up by 0.6% against a 0.4% forecast. Data for Q3 was reassessed upwards from 0.9% to 1.1%. Aussie GDP was up 3.0% YoY (reassessed from 2.7%, previous: 2.7%, forecasted: 2.5%).

Current Situation

Due to a restoral of oil prices to $38.92, the AUD/USD rose to 0.7435. So what should we be looking at? If we make a channel along L0.6907 – L0.6826 – H0.7439 – H0.7384,we see that the AUD/USD has broken through the upper limit of the channel.

A growth of Brent to $40.50 will see the AUD/USD rise to 0.7560 and if it hits $42.50 then the rate will rise to 0.7670. The strengthening of the Aussie will cancel out with a close of the daily candle below 0.7230. A perfect working of the rate will leave us above the upper limit of the bkb channel at 0.7345.

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By: Vladislav Antonov