AUD/USD Rallies Sharply, Forms Double Top
Maks Maksov | Oct 09, 2015 06:49AM ET
The AUD/USD has rallied sharply from its support area which is marked in light blue in the above H4 chart and how now reached its resistance are marked in light grey. Price action has now formed a double top chart pattern which further supports a sell-off in this currency pair.
The upper band of the Bollinger Band® indicator peak through the resistance area, but is expected to breakdown and reverse its advance. The middle band as well as the lower band are also sloping higher.
Price action is currently trading between the middle band and the upper band of the Bollinger Band indicator. A breakdown below the middle band would follow the breakdown below the resistance area and result in a trend change for the AUD/USD. Forex traders may use this as a good level to realize floating trading profits and exit their short positions. The profit taking sell-off is expected to push this currency pair back into its support area.
Forex traders are advised to enter short positions at 0.7270 and above in order to be well position for the expected profit taking sell-off in this currency pair and a break in the up-trend. Conservative forex traders should wait for price action to break down below the middle band of its Bollinger Band Indicator which will increase selling pressure. A take profit target of 0.6950 has been selected for a potential trading profit of 320pips. Forex traders should protect this trade with a stop loss level at 0.7400 for a potential trading loss of 130 pips which will result in a Risk-Reward (RR) ratio of 2.46.
- Short at 0.7270
- TP at 0.6950
- SL at 0.7400
- RR: 2.46
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