The AUD/USD has continued its meteoric rise from its trend low at .6005 on October of 2010. Since that time the pair has rallied for a total of 4576 pips with the new high created this month. However, the pair finds itself at an impasse. The pair has been consolidating in a Chunnel pattern since the end of last week with neither higher highs nor lower lows being established
As traders begin to look for direction, I want to take a minute and review our Economic Calendar. On April 5th the Reserve Bank of Australia left their official interest rate unchanged at 4.75%. Tomorrow we have the AUD Reserve Banks Board Minutes. This will give us insight into the direction of future policy decisions. If the economy is contracting and interest rate hikes continue to be put on hold this may work against the Aussie Dollar. Likewise growth and talk of rate increases would have the ability to work the currency to new highs against the Greenback .
Price Action
Taking price in to a 4hr chart, we can see the development of a Chunnel pattern. This is confirmed by three strong price points connected on our support line. The top resistance line is matched by connecting the two lower highs. Price is intending to squeeze further before an imminent breakout. Profit targets can be managed by looking at the distance between the original low ( 1.0287) , and our first high (1.0581)established on the pattern. Limits should be placed at minimum of 294 pips away on a breakout.
Trading Opportunity
Our Chunnel pattern gives us a great chance to establish entry orders on either side of the trade. Traders can look to sell a fresh break of support, if price closes under 1.0453. Likewise, Bulls can feel free to join the party if price establishes a new high over 1.0581. Either way, we should use our limit projection of 294 pips and create a Risk-Reward scenario well over 1:2.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
