AUD/USD made a strong rally yesterday thanks to upbeat jobs data, but it was unable to sustain its rally when Chinese CPI came in weaker than expected today. The pair topped around the .9450 minor psychological resistance level and is showing signs of pulling back to an area of interest.
As you can see on the 4-hour chart of the pair, there is a former resistance level at the .9300 major psychological mark. This lines up with the 61.8% Fibonacci retracement level. Stochastic is still moving down from the overbought zone, which means that sellers could push for a retracement back to the rising trend line. Take note though that the 50% Fib is better lined up with the trend line.
Going long at the 61.8% or 50% Fib levels with a stop below the .9300 major psychological support and trend line and a target of .9450 could yield a 2:1 return on risk for a day trade. Aiming for new highs could improve the return on risk but it would be prudent to move the stop to entry once price tests the .9450 area.
By Kate Curtis from Trader’s Way