Trade view /
25 August 2016 at 7:39 GMT
USD Index – We did break above the triangle top (trend of lower highs) but gains were sold into for the index to close the day back inside. This does not give much clarity on what to expect over the next two days but USD majors, we think, still hold a marginal USD bearish bias. These are all high-risk trades but they do offer the best risk/reward if caught properly.
Source: Saxo Bank
I have taken a long AUDUSD position and here is why:
Monthly – Long timeframes offer an eventual bearish bias but a break of 0.7000 (area) would be needed to take the pair lower. Considering we have had a period of 12 months with little relative net movement, this could be a way off. The 0.8000 area is off note to the upside as, not only is it a Big Figure, but it's also an area that has been pivotal. Elliott wave would dictate that we are in a 4th wave correction.
Source: Saxo Bank
Weekly – Highlights the pair in a corrective channel formation. Although we did reject gains at the 38.2% pullback level of the last wave at 0.7849 (common Fibonacci level) the losses were not sustained. In fact, a full AB=CD formation takes the pair to the 50% pullback level of 0.8165. This is our prime medium-term focus. As long as 0.8658 (swing low) is not breached then the long-term outlook (monthly chart) holds an eventual bearish bias.
Daily – Shows a prolonged period of consolidation (12 days if spikes and Dojis) as we run into this major news event. Trend line support is seen at 0.7550 with levels below used as a stop.
Intraday (four hours) – This timeframe highlights the twelve days of consolidation forming an Expanding Wedge pattern. This pattern has an eventual bias to break higher. Lower trendline support is seen at 0.7544.
Management and risk description
There are two possible trades in play here, intraday and medium term.
Long at 0.7624
medium term stop 0.7540 - intraday stop 0.7590
intraday 0.7735 (channel top) or 0.7770 - medium term 0.8150
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more