Some of the largest trading profits come from going against the herd. This knowledge protects contrarian traders from the insults and ridicule of their fellow traders, and keeps them warm through the long dark nights of seemingly endless stop outs.

The consensus view is that AUD/USD is going significantly lower. The bears cite a weaker outlook for China, falling commodity prices and declining terms of trade. FX traders, eminent economists and the Governor of the RBA are looking for a lower Aussie. Yet the chart is telling a different story:

AUD/USD daily

20140221 audusd

The down channel is clearly broken. The MACD is showing positive (although diminishing) momentum. And there is a case for a reverse head and shoulders pattern that gives a clearly defined trigger point.

One of the reasons successful contrarian trades can be highly profitable is the triggering of other participants' stop loss orders. The CMC Client Sentiment Indicator currently shows 73% of top clients with an AUD/USD position are short. My guess is that there are significant stop loss orders just above the neckline of the H&S at 0.9080. Note the November/December congestion between 0.9085 and 0.9145.

This is not a short tem trade, and AUD/USD must move up through 0.9080 to confirm the pattern. However, if it does, what would normally be resistance around 0.9085/0.9125, 0.9280/0.93, 0.9525 and 0.9750 could instead provide acceleration, as traders are stopped out of their re-established shorts. A tight stop loss below 0.9080 on a BUY stop entry at 0.9090 could be a cheap way to find out.