How to Trade Breakouts – Forex Breakout Trading Strategy
The Australian Dollar: What Every Forex Trader Needs To Know
FUNDAMENTAL POINT OF VIEW ON AUSSIE:
In its last statement, after leaving the cash rate unchanged, the RBA wrote:
“Conditions in the global economy are continuing to improve. Labour markets have tightened further and above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Commodity prices have risen recently, although Australia’s terms of trade are still expected to decline over coming years.
The recent data have been consistent with the Bank’s expectation that growth in the Australian economy will gradually pick up over the coming year. The decline in mining investment will soon run its course. The outlook for non-mining investment has improved recently and reported business conditions are at a high level. Residential construction activity remains at a high level, but little further growth is expected. Retail sales have picked up recently, although slow growth in real wages and high levels of household debt are likely to constrain future growth in spending.”
In the battle to keep its currency down, the RBA chose not to join other Central Banks in the recent trend of increasing overnight rates. Though we have had recent commentaries from Philip Lowe, RBA’s Governor that it would be prudent to assume that the “next rate move will be up rather than down.”
The markets are not expecting a rate hike in October’s meeting though and just like any other central bank Governor, Mr. Lowe will not want to surprise the markets. Therefore, the picture will likely remain unchanged.
With a very weak US Dollar which is showing no signs of a reversal yet, we might be safe enough to rely on the technicals with a strong fundamental bias favoring the Australian Dollar.
TECHNICAL POINT OF VIEW ON BREAKOUT TRADING STRATEGY:
WEEKLY VIEW FOR AUSSIE:
From the Daily chart on the right, we can see the AUD/USD has managed to breakout trading the Ascending Trending Line which had been holding the upside momentum for the last 4 months. The near-term momentum is Bearish for this currency pair. We have an opportunity to join the flow here and short this market @ 0.7965 if we pull back from where we are now which is in confluence with the 50% fib of the last swing high to low. The long-term momentum on Aussie is still Bullish and that’s where Platinum Traders will be waiting to enter this market @ 0.7725 and 0.7635 for another run into the most recent highs of this year. That would be a perfect pullback of the Long-term trend move into the 50% Fib or our Platinum Premium level at the 38.2% fib.
AUD/USD TECHNICAL CHART:
AUD/USD Forex Breakout Trading Strategy
HOW TO TRADE THE AUD/USD:
- Long the AUD/USD @ 0.7725 or the nearest zone with 40 pips stop loss and a target of 0.8050
- Long the AUD/USD @ 0.7635 or the nearest zone with 40 pips stop loss and a target of 0.8050
- Place alerts on the major and minor support areas and match them with the zones and go for 20/20 trades
KEY TECHNICAL LEVELS ON EUR/JPY:
- 7965 – Short-Term Selling level
- 7725 – Long-Term Buying Level
- 7635 – Long-Term Buying Level – Platinum’s Premium Fib level
- 7515 – Short-Term Buying Level
- 7330 – Long-Term Buying Level
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