Updating the “Under Water Down Under” Trade

Back on August 25, I suggested that after a sharp move downward, the AUD/USD had bounced sufficiently to offer an enticing level for entering a new short position around 1.0470. In the interim, the sharp rise in risk appetite has pushed AUD higher in its wake despite some additional snugging by the People’s Bank of China (PBoC), normally an Aussie slayer.

The initial sale was intended to be added to on a move into the moving average resistance; that area has now been reached and even slightly exceeded. The 1.0630 level was alluded to in the earlier post as a good place to add,  making the average price for the postion 1.0550. At the current price, that is 0.9% out of court, not a disaster, but an annoyance.

Today thus far has been a “risk off” sort of day, but a mining company has been a large buyer of AUD for, presumably, commercial reasons having little to do with market mood. I would be inclined to stop this position out on a move materially above today’s intraday high of 1.0686, say 1.0715.  

Stochastics are overbought, but the vertical bars aren’t indicating an imminent reversal. A stop done on a break of 1.0715 would probably be executed around 1.0720, a loss of 1.6%.  The profit target on the downside is now 1.0310, which would, if it came to fruition, represent a gain of 2.3%. The stop level is, of course, materially closer.

As a wise friend of mine is fond of saying, “That’s why we call it trading, not money harvesting.”