Australian dollar futures have been locked in a consolidation pattern for months. The pair was originally addressed back on July 17 when the AUD was nearing triangle breakout levels. The breakout of the triangle was short-lived, in both directions, as the price continued to move mostly sideways.
A recent lower swing high and an then sharp selling on September 2 indicates the tide may be shifting for the AUD, as it poises for a major move.
Here's the AUD/USD chart, upon which the futures are based, showing the breakout level lower at 0.9201. There is another rising trendline that marks a break lower at 0.9237, offering a bit earlier entry.
Figure 1. AUDUSD Daily Chart
There are two ways to trade this chart setup using the Australian dollar December contract, shown in figure 2.
Figure 2. Australian Dollar (6A) December Contract, Daily Chart
Assume the breakout lower based on the lower highs and the head-and-shoulders like structure of this consolidation. That means taking a trade in the vicinity of 0.92, with a stop above the recent high at 0.9303 and a target near 0.88.
The other option is to wait for a break below either the rising trendline at 0.9159 (actually the August low) or the consolidation low at 0.9087. Target and stop are the same as above.
The first option has a lower risk in terms of points, and a higher profit potential. The latter provides more confirmation a big move is potentially commencing, but by waiting point risk increases and point profit decreases.
The overall risk of the short trade is that this consolidation continues, or the price begins breaking to the upside.
There is also a Australian dollar E-Micro contract - M6A.