Tuesday's Trade

AUDUSD – sell limit at 0.7075


Stop loss: 0.7205


Take profit: 0.6850


Justification: AUDUSD is recovering some ground following very large declines over the course of the last few days. The pair takes advance of an improving market sentiment that is not only benefiting equities but also industrial metals – both tendencies being positive for the Aussie. As a result the pair is testing a short-term, aggressive trend line and may very well breach it, leading up to a small short squeeze that would bring it even higher. And that would be – in our view – a good shorting opportunity. While moods regarding China may stabilize for a bit, we do not see industrial metals’ prices rebounding strongly any time soon and a burden of unfavourable terms of trade will be felt by the Australian economy for a longer time period, possibly leading to another interest rate cut. Looking at the chart, a level of 0.7075 seems to be a strong one – it served as a support in the past and now should be a resistance.