In Sunday’s Game Plan I was looking for an AUD/USD long anticipating the Royal Bank of Austrailia (RBA) would raise their interest rate. Often news trades happen the day prior as traders attempt to price in their expectations. I got long at $.8790 along demand, and I bailed out just prior to the rate statement due to a technical setup I call the “back nine”. When a trend line is broken the market often returns to test an extension of the broken trend line, I call this test a “back nine” setup.  If you don’t play golf the term “back nine” refers to the last nine holes of an 18 hole course. When a back nine setup occurs it often represents an opportunity for bargain hunting traders to join a breakout at a discounted price. The back nine also represents a chance to salvage what is left of my golf game before I end up complaining about faulty irons at the clubhouse bar. In this setup I knew I was long against the dominate price action so I took profit at the back nine, just prior to the rate statement. That turned out to be a good decision because the RBA surprised the market and didn’t raise rates. So why is AUD/USD still the focus for today’s Technical Tuesday post?

I’m bringing this up in case you are still eying the supply level at $0.88. In my opinion, this supply level is probably going to be a lame duck given the RBA didn’t raise rates. Traders are dumping Australian dollars faster than Rush Limbaugh can bust a move to Lady Gaga’s Poker Face. I think there is serious downside risk for the Australian dollar at this point, bulls beware.

Best of luck,

Ryan

Last week I talked about the big AUD/USD channel I’m watching for range trades over on my FX Street blog. Tonight the pair is hanging out near the bottom of this channel but I’m not convinced a turn to the long side is in the works yet.  I’d like to see a convincing test of this lower trend line before considering a long. Frankly I think this pair could probe lower before a turn comes.

Given the right mix of candle patterns and CCI the four hour chart may yield a long trade along support in the $0.6330 neighborhood, wait and see.

Looking To Sell EUR/USD

Given Monday’s breakout I’m looking to sell EUR/USD on a pull back, I talk about on my FX Street blog.

Here is the link:

http://blogs.fxstreet.com/dayjobtrader/2009/02/18/eurusd-breakout-play-usdjpy-thoughts/

I hope your having a great trading week!

-R