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Talking Points:
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AUD/USD Technical Strategy: Short at 0.7233
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Aussie Dollar finds support near 0.71, rallies to retest broken trend line
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Short position triggered as recovery improves risk/reward parameters
The Australian Dollar launched a sharp recovery against its US counterpart having found strength above the 0.71 figure after breaking rising trend line support. The pair has found strength in an optimistic RBA policy announcement as well as better-than-expected fourth quarter GDP figures.
Near-term resistance is in the 0.7230-59 area, marked by trend line support-turned-resistance and the February 23 high. A break above this barrier on a daily closing basis paves the way for a test of a double top at 0.7382. Alternatively, a move below the February 29 low at 0.7109 opens the door for a challenge of the 38.2% Fibonacci expansion at 0.7046.
The upswing over the past three sessions has produced acceptable risk/reward parameters to trade the earlier trend line break and we will now enter short, in line with our 2016 fundamental forecast. We are initially targeting 0.7109, with a stop-loss to be activated on a daily close above 0.7259. Half of profits will be taken and the stop moved to the breakeven level once the first objective is reached.
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