And I’m in! After EUR/AUD showed confirmation from the reversal pattern and made a quick pullback, I decided to hop in at market. Before reading on, make sure you check out the longer-term patterns I was initially watching on this one.
In my earlier trade update, I mentioned that I already had a buy stop order above the 4-hour double bottom neckline just above the 1.4900 handle. Price broke above the neckline resistance alright but not enough to hit my order so I thought it was my chance to revise my entry strategy and go for a small pullback instead.
On the 1-hour time frame, I saw a rising trend line connecting the lows of price action for the past couple of weeks so I waited for a test of this support area. I’m seeing a few reversal candlesticks around the 1.4840 area, which convinced me to take a long position at market.
I’m euro bullish these days because it appears that market participants are easing up on their post-Brexit short positions as data hasn’t turned out so bad. Euro zone flash PMI readings for August are still lined up for today and improvements are expected for the manufacturing and services sectors of Germany and France.
As for Australia, news of a slowdown in China’s property sector seems to have hit the commodity currency hard last week, as this would translate to weaker iron ore demand and prices. To top it off, warnings of a credit rating cut on Australian banks might keep clouding their economic outlook.
I’ve still maintained my stop and target areas from my earlier setup, but this slightly lower entry should give me a better return-on-risk of 1.4:1. Here’s what I have:
Long EUR/AUD at 1.4840, SL at 1.4425, PT at 1.5425.
I’ve risked 0.5% of my account on this setup. As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.