It's all about the Ozzie.... (Australian Dollar that is!)

Hey traders! Firstly, a thank you to all those who sent me personal emails regarding potential trade setups; I'm glad they've helped. October was a good month (the EURCAD short posted last week (http://qitrading.blogspot.com/2012/11/current-opportunities.html is still running) but is just one out of a year. The most important trait of a successful trader is to keep level headed, win or lose; keep it emotionless!

Whilst I don't have anything major on my watchlist (of course I will let you know when I do!), the Australian Dollar has caught my interest both technically and fundamentally. 

A report last week showed that the Reserve Bank of Australia allowed its FX reserves to grow significantly without balancing the inflows by not converting foreign currency back into Australian dollars - a move likely aimed at weakening the Australian Dollar. Subsequently, the AUD has been held in a range. With the Swiss National Bank also announcing that the percentage of Euros held with them have dropped to 48% from 60%, many are suggesting that the SNB may be done selling Euros. This will be a positive for EURUSD but negative for alternative assets such as AUD. Combined with the issues facing the RBA we could see a strong rally in this currency. With a potential RBA rate cut on the cards on Tuesday this could add fuel to the fire. However, I never solely trade of just fundamentals, the technical picture has to say the same thing. We also have to bear in mind the Eurozone problems, a possible recession in China and the US fiscal cliff coming up. 

However, looking at the technicals it seems as though we have some decent trade setups. I'm currently looking at:

EURAUD Long - Support is found at the 38.2% retracement from August lows to October highs. Several oscillators such as RSI and Stochastic are pointing to a heavily oversold position in relation to previous lows. The low test bar/hammer candlestick could provide the confirmation of this. The target will be just below the 1.30 handle

AUDJPY Short - Price has been held in a 6 month range and is currently testing the upper limit. The RSI divergence potentially shows a reversal is likely and the high test bar/shooting start candlestick may provide the confirmation of a move lower

Whilst I am currently in Norway for most of the week, I'll endeavour to post more after the US election results to see what if historic seasonal trends will be in our favour. 

Happy trading!