Trade Recommendation: AUD/HKD

The Australian Dollar/Hong Kong Dollar pair (AUD/HKD) started its downtrend in May 2013 when it broke support of 7.50. This triggered the large rounding top reversal pattern on the weekly and monthly charts. From there, the market generated a series of lower highs and lower lows until it bottomed out at 5.32446 in January 2016. In about three years, AUD lost almost 30% of its value against HKD.

At this price level, the pair flashed reversal signals. A bullish divergence was spotted on the weekly RSI. In addition, the 4-day, 9-day, and 21-day moving averages were all detached from the weekly candle. This was a good indication that the downtrend was no longer sustainable.

Those who saw the writings on the wall began to buy the market. This sparked a rally to resistance of 6.00 in April 2016. While bears were able to hold on to the resistance, bulls have responded by creating a higher low of 5.55541 in December 2016. AUD/HKD has come to life since. This could be your chance to buy the next higher low.

Technical analysis show that the Australian Dollar/Hong Kong Dollar pair has taken out resistance of 6.00. This activated the ascending triangle pattern on the weekly chart. The breakout was affirmed by a rally to 6.33988 in September 2017. While the market is currently pulling back, it could be a good opportunity to buy the confirmation of the breakout.

The strategy is to buy the dip as close to 5.90 as possible. If bulls can stay above this level, they may gather the momentum required to move to our target of 6.65.

The process may take more than six months.

Weekly Chart of AUD/HKD on OANDA

As of this writing, the Australian Dollar/Hong Kong Dollar (AUD/HKD) is trading at 5.96107 on OANDA.

Summary of Strategy

Buy: As close to 5.90 as possible.

Target: 6.65

Stop: 5.80

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.