AUD/USD Analysis on Multiple Time Frames

03/05/2010 12:01 am EST

Focus: FOREX

Here is our reward and risk assessment for what appears to be an upcoming bullish swing in the AUD/USD currency pair.

The daily time frame shows a confluence of two swing projections and the 78.6% retracement level near the 92.0 area, and this has been established in recent posts as the target for the current intermediate-term rally. We are now in a second swing that started at 0.88.

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The four-hour time frame shows a short-term retracement, so far to the 38.6% level. The next support if this breaks is the 0.8940 area, which is the 50% retracement. We will also see that this is a swing projection of the first leg of the current decline.

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The screenshot below shows the reward and risk assessment for two scenarios. The first is that the current retracement decline continues to the 0.8940 area. Then, if a bullish signal closes near 0.8960, we have a reward-to-risk ratio of 2.66:1 (assuming the target is 92.00 and stop loss is calculated by 3ATR below power line).

If, however, the market does not decline further, and is supported above the 0.8970 (38.6% retracement) level, the reward-to-risk ratio is 2.11:1.

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By the Staff at Capital Market Services, L.L.C.