Trade of the Week starting 20 June: long AUD/USD
In this week’s Trade of the Week, IG's chief market analyst, Chris Beauchamp, looks to go long AUD/USD with a stop-loss at $0.6840 and an upside target at $0.7250. He also looks at last week’s trade, which was short gold.
(Video Transcript)
Hello, and welcome to IG's Trade of the Week for the week beginning Monday 20th June.
Each week we look at a key market to trade and a potential trade and risk management around that price action.
Short gold
But first, we look back to last week for the trade beginning Monday 13th June. In this, Axel Rudolph looked at going short gold with a stop at $1,878.
Initially this worked out beautifully, because Monday you had this huge drop in gold down around 2.7% for the day. And that followed through into the Tuesday. So it seemed to be working out very nicely.
But then you had a rebound in the middle of the week, which then stalled on Friday. So I suppose honours even for buyers and sellers last week.
But as the new week begins, gold appears to be weakening once again, dropping back below the 200-day moving average below $1,840. So this one is still really intact and certainly is nowhere near the stop-loss at $1,878 for the time being, so maybe one just to let run and see whether it works.
Obviously if it gets back towards $1,860, $1,865 maybe we'll start to feel a bit more nervous. But for the moment, gold looks to be running out of steam, potentially validating that short trade idea.
Trade of the Week: long AUD/USD
Moving to this week, it looks like we might have the makings of some kind of risk rebound.
Of course we said that before, but if you're looking at a number of currency pairs and indices markets, maybe they have found a short-term low now that all the excitement around the Federal Reserve, etc. is perhaps out of the way for the time being.
So while, in the context of a longer-term risk-off move, perhaps it's time for the pendulum just to shift back again in the short-term. So perhaps one way to look at that will be AUD/USD, which has begun to recover actually after its sharp declines in the first couple of weeks of June.
We went from about $0.7250 against the US dollar down to $0.6850. But since then we have recovered and so we're looking to go long the Aussie dollar against the US dollar for this week.
At the moment you're seeing it pressing back towards the $0.70 mark. You've had a higher low perhaps carved out here between Friday and into Monday's session, so that's an encouraging sign as well.
So the idea here is we look to go long the AUD/USD with expectations perhaps of initial upside towards that June high towards $0.7250 US cents, for this one. And then in terms of our stop-loss, we're going to put this one below the 14th June low, which was at $06850, bang on $0.6850, so put it down at $0.6840 on this one, just a little bit more room below that one, just in case you get some volatility around that $0.6850 level. And if it drops back to there then clearly the exposition for further upside will have been negated.
So that's long AUD/USD for the week beginning Monday 20th June with our stop at $0.6840.
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