AUD/USD recently broke below the short-term support area on a smaller range and may be poised to test the bottom of the larger range visible on the 4-hour forex time frame. Price has traded below the .9350 area and made a small pullback before resuming its drop.

If you’re looking to catch a short trade, you can sell at market and aim for the bottom of the 4-hour range at the .9220 mark. If you’re bullish on AUD/USD, you can wait for an actual test of .9220 and for stochastic to cross out of the oversold area before going long.

A long trade might offer a better return on risk, as a tight stop and a target at the mid-range area of interest could yield as much as a 3:1 return on risk. Aiming for the top of the range might also work out but it would be prudent to adjust the stop to entry once price tests the .9350 zone.

By Kate Curtis from Trader’s Way.