- Short AUDUSD at net 0.9192 (1/2 0.9164, 1/2 0.9220), Stop at 0.9350, Target 1 at 0.9045, Target 2 at 0.8960 [total risk = 93-pips/full size position]
- Exited Short GBPUSD from 1.5390 at 1.5390 for 0-pips
Typical Time Frame: 1-day to 1-week
A surprise, late article from the Fed's mouthpiece on Thursday provoked rampant US Dollar selling late in the US session, knocking out my short GBPUSD position at flat and putting the AUDUSD trade underwater. However, I was anticipating a rebound in the AUDUSD, as I noted in yesterday's analyst pick that I intended to fill out the entire position to full size at 0.9220 to bring my net short to 0.9164.
Given the scope of the USDJPY turnaround, it appears that AUDJPY may be the favored pair to take advantage of further Australian Dollar weakness. While I may cycle into the AUDJPY; there are still several reasons that I still find AUDUSD attractive to the downside:
- Rate cut expectations for the RBA's August 6 meeting peg a 72% chance of a 25-bps cut, up from 44% at the end of the week of the July 2 meeting.
- Although the Fed may outline measures to focus on keeping interest rates low (very important for US housing), once the pace QE3 slows, investors will sell their US Treasury holdings, pushing up rates, supporting the US Dollar.
I also host a weekly Live Trading Q&A in DailyFX Plus, on Tuesdays at 06:00 EDT / 10:00 GMT, in which I delve deeper into my positions and thought processes behind my analyses.
--- Written by Christopher Vecchio, Currency Analyst
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