Trade of the week: long AUD/USD

In order to make this trade viable from a risk/reward perspective, we would like to only go long on a retracement to $0.6415, though.

Previous trading outcomes

(Partial video transcript)

Axel Rudolph: Hello and welcome to this week's "Trade of the week" on Monday the 9th of December 2024. A couple of weeks ago we went short New York orange juice futures and we had a stop loss at 505 on a daily chart closing basis. And we did intraday trade above that level twice, but never closed above it and actually closed below the psychological 500 mark.

And as you can see here on the daily chart, we are now in profit on this trade. And we'll have to see whether we can get out of it today as we're heading towards the end of the year, it might be a good idea to either lower your stop loss level to your entry level, thereby having a free trade on, or just cashing in your profits now as markets will probably become less volatile towards the end of the year. So that trade is something you need to watch if you're still short there.

And then last week we went long Lloyd's Bank shares and you can see here we had a stop loss just below the lows here going back to June of this year. And we bounced back from our entry level, you can see here is this horizontal line, just after getting in. So, we really got the low here on that chart more or less. And we're up by about 1.3% or so and are still in profits either here, if you want to cash in a short-term profit, you can do so, or you can try and let it run and perhaps again, move your stop loss to your entry level, thereby having potentially a free trade on.

If you don't want to do that, it probably makes sense to just keep the stop where it is at the moment, around 52.30p, because it's not just marginally below the current December level, but also below that June low, and if the share price were to fall through this major support area, it's likely to continue to the downside. But as long as it holds, it may actually continue to bounce off those lows we saw last week.

This week's trading opportunity

And this week what I would like to do because of China, hinting earlier today that, it might actually loosen is monetary policy and the effect of this being potentially that countries like Australia might benefit from selling their goods into China, and if the Chinese economy were to grow again at a larger pace than it is at the moment, that could lead to a bounce in AUD/USD.

As you can see here, we bounced off Friday's lows, which were made very close to the August lows. So we've got really good support as well here, technically speaking. And I'd like to go long. But since we're trading against the trend, what I would like to do is to wait for a retracement lower because I want to have a small stop, if I were to get stopped out, small risk. And the reason also is that by the end of the year, because we'll probably close down our positions, then it's unlikely that this currency pair is going to rally very strongly. So maybe we could get out around $0.6500 or so. And in that case, from a risk/reward point of view, it only makes sense if we have a smaller risk here at the downside.

So today's "Trade of the week" is to go long the Australian dollar versus the US dollar at around $0.6415, so on... and it might not retrace lower again, with a stop loss below the August low, at say $0.6345 and an upside target around that $0.65 mark.