It has been a while since my last post, but I’m back in full force for now. I’ve been on StockTwits 24/7 and not writing any posts 
.
My goal is to bring more of the graphs I’ve been posting on StockTwitsFX to the blog and expand my technical and fundamental analysis here. I’ll still post lecture notes, longer-term fundamental analysis, and other general economics-related posts, but short-term technical analysis will likely be the core.
Earlier today, I opened a short position on the AUD/USD pair after the Australian GDP Data. The numbers showed that the Australian economy grew 0.9% quarter-over quarter and 2.7% year-over-year. In general, the numbers were in line with expectations. Yesterday, the Australian central bank also increased its cash target rate from 3.75% to 4.0%, which was also in line with expectations.
Even after all the good news, the Aussie-dollar was not able to break through a key resistance point at .9070. It tried to break the .9060 level 3 times within 24 hours and failed. Given that an interest rate hike and solid GDP numbers did not propel the pair upwards and break resistance, I opened a short position at .9049.
The only tail risk left that I see which could break the resistance would be a resolution package for Greece that would lift risky assets and currencies across the board. I’ll take my chances on that one. The U.S. ADP jobs number is also a risk, but the dollar’s reaction to the news is a coin toss (risk-trade vs. U.S. outperformance tug of war) . I was also planning on closing the position before the jobs number at 8:30 AM Eastern time.
So those are the fundamental reasons behind the position. As for the technical analysis, what primarily got me into the position were the pattern formations on the AUD/USD 15 minute chart (which I uploaded to StockTwits earlier in the day) and hourly chart. Here is the 15 minute chart:
Click on image to see full-sized chart.
As the chart shows, the AUD/USD formed an evening doji (with a big wick) after a strong uptrend. The doji was then followed with a bearish red confirmation candle. Additionally, there was a pronounced MACD bearish divergence that indicated upward momentum was fading.
On a longer time frame, the hourly chart also displayed a bearish MACD divergence with a triple top formation.
Overall, the AUD/USD position had an entry at .9049, with a 36 pip stop loss at .9080. This stop-loss would hopefully allow any further challenges to the .9060 level and even .9070 (a conservative attack) without stopping me out of the position if the direction was still down. My initial target on the position is at .8980, which is a big congestion and support zone . This leaves the position with a risk-reward ratio of (69/36)=1.92, which is very appealing.
Now, it’s time to wait and see. I would like to close the position before the U.S. ADP jobs numbers. Currency trading is just too volatile to keep profits open for too long.
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