We are looking to buy the Australian dollar to start April. The Australian fiscal year runs July-June. The Australian dollar has tended to make a bottom in late December, rally into the first month or two of the year, and then trade sideways into March before rallying into mid/late April. This segment of that seasonal trend has been particularly reliable. The trend for this year does not fit the exact scheme of previous years but does give us a good setup. Price did not bottom in December as it usually does but did have a strong rally for the first 2 months of the year to reach the 2021 high on February 25th before dropping into a sideways choppy consolidation for most of the month of March.
Moore's has the June Australian dollar as a buy on April 4th, with the trade being profitable 15 of the last 15 years and an average profit of over $1,100.
According to sentiment trader, the best month of the year to buy the Australian dollar is in April.
Many things are supporting this rally, weakness in the US dollar will be a large driver. Positive economic data is being reported in numerous reports, especially jobs data coming in 300,000 above expectations last week, and a $2.25 trillion infrastructure plan will have a largely negative impact on the USD with many reports suggesting this is the first of two $2 trillion dollar infrastructure plans. A strong dollar is not going to be good for an economic recovery so monetary policy will continue to be eased and the value of US currency will be negatively impacted, providing support to strong currencies like the Australian dollar where they have harder monetary policy and are know for having higher interest rates in place to combat inflation.
Using Fibonnaci retracements from the 2021 high to the current low, we can estimate a price rally near the 61.8% retracement level of 0.78269. We will look to enter the June Australian dollar at 0.763. This rally would be worth $1,969. We will place stops below the recent low at 0.753 risking $1,000, a 2:1 risk reward ratio. Margins per contract are $1,980.
Recommended entry or exit prices may not necessarily be reflected on the track record. Markets can change quickly resulting in stops being moved or profit levels changed based on new information. Brokerage customers are the recipients of these potential price adjustments made after initial recommendations.