My post on Wednesday outlined a road map for the Aussie Dollar chart indicating that we were beginning a significant corrective rally. The market was positioned to react sharply to positive news which was certainly delivered in the form of the GDP announcement later that morning followed in quick succession by yesterday's very strong employment growth number.
For swing traders, this road map suggests a strategy of buying into weakness looking for good risk: reward points to trade in the direction of the uptrend and strong momentum on the daily and weekly charts. To read the post outlining my view of the overall market structure Click Here.
The Aussie looks to have formed a short term peak last night at about 1.0003. We may now be getting the sort of minor downward correction that could provide a buy opportunity.
At this stage we look to be in a retracement of the swing up from 2 to 3. On that basis, I will be looking for any sort of buy set up that indicates this retracement is ending at some point above the peak at "1".
Overlap below "1" would be a potentially bearish development suggesting that the whole corrective rally may have ended.
Assuming we stay above "1" though, I will be on the lookout for buy set ups. One distinct possibility is an ABC correction of the 2 to 3 rally.
Another approach may simply be to buy at the 61.8% retracement level with a stop below the 200 hour moving average (green line). This would have good risk: reward potential given the possibility of a new swing higher and a move above "3"