In the last 2 months the Australian dollar has danced the trend line as seen in the chart above. However, during that time frame prices have appreciated 5%, lifting prices to multi month highs.
My take is the party is almost over and prices are expected to trade lower from overbought levels, at least in my eyes. Confirmation would obviously be on a breach of the up sloping trend line and 20 day MA which comes in roughly at the same level: In the March futures contract at just under $1.04.
The most viable play for my risk appetite is getting short futures while simultaneously selling out of the money puts. Into Q1 I think we could see price approach par which would represent a $4500 move in the futures market. Depending on the options sold and exact timing, this should allow traders a window to make $1500-2500 per strategy.
As for risk on a new high I would advise cutting losses or at a minimum managing the trade and adjusting your options hedge. A new high represents a $750 move in the futures market.
The logic outside of just the technical picture: I think the Australian dollar could be vulnerable as uncertainty likely will persist since I see no quick fix for the fiscal cliff. An additional consideration if you ignore the short term noise is where are interest rates headed in 2013? The RBA is one of the Central banks that likely will participate in monetary easing, lowering rates into next year in my opinion. The idea if “risk off” also supports easing in the Aussie. After all, as commodities go, so do the commodity currencies.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.
Which stock should you buy in your very next trade?
With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities.
In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record.
With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.