Long-term Fib Play on EUR/AUD – Trade Closed

Trade Closed: 2013-05-02 01:30

EUR/AUD Daily Chart

The markets just haven’t been acting the way I predicted they would! Instead of selling off ahead of the ECB rate decision, the euro has been appreciating. It’s defying the laws of gravity, man!

You’d think that it would weaken with the ECB widely expected to cut rates, but that hasn’t been the case. Some say that optimism for Italy’s new government has played a role in the euro’s rally. Others say that it’s because we’re finally putting the whole Cyprus bailout ordeal behind us. Still, there are those that believe that the euro is rising because they think a rate cut would do the economy good, and this is restoring confidence in the euro zone and the shared currency.

In any case, this has been a bane for my trade. In fact, I got stopped out just this morning.

Stopped out at 1.2850: -210 pips / -0.50%.

Yeah, it sucks seeing my streak come to an end like this, but I have no regrets. I still believe it was a fine technical and fundamental setup and would take it again in a heartbeat!

Anyway, I hope you guys had better luck! Til next time, this is Cyclopip, signing off!

Trade Idea: 2013-04-25 03:15

EUR/AUD Daily Chart

I’ll admit, price action has been pretty choppy this week and with the Bank of Japan interest rate statement coming out tomorrow, it’s just too difficult to be playing the yen crosses right now. That said, I’ve decided to focus my attention on other pairs, and I’ve come across this longer-term setup emerging on EUR/AUD.

Fundamentally, I think we could see the euro weaken against the Australian dollar, as recent speculation is that the ECB may cut rates in order to support the economic bloc. Recent data from Germany hasn’t been encouraging either, as manufacturing and services PMIs as well as the German IFO business climate report all printed weaker-than-expected results earlier this week.

As for the Aussie, we’ve been seeing it stumble in recent weeks, but with AUD/USD approaching key support around 1.0200, I think selling pressure could come to an end soon.

Technically, we’ve got a simple Fib setup near a former resistance zone, as price is currently finding resistance at 50.0% Fib level. Coupling this with the bearish marubozu candle on the daily chart and Stochastic indicating overbought conditions, I think this setup is ripe for the picking!

Here’s what I plan to do:

Short EUR/AUD at market (1.2640), stop loss at 1.2850, take profit at 1.2250.

This gives me a pretty solid 1.85:1 reward-to-risk ratio, which can be further maximized if I plan to add on the way down on retracements. As usual, I’ll be risking 0.50% of my account on the trade.

What do you fellas think? Do you agree with my analysis on this long-term setup?

Risk Disclosure
Weekly Watch: April 22 to 26, 2013
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  • Goodboy

    Hi Cyclopips,

    just wanna ask how do you manage your stop loss if the trade go on your direction? ( normally )
    you move stop or don’t?

    • cyclopip

      Hi Goodboy! It depends. If the market has moved a considerable distance from my entry, I usually move my stop to lock in pips. If not, I tend to give it a bit of breathing room. Also, if I’m expecting extra volatility (from a news release or a major event), I usually move my stop.

  • az za

    this one your idea is good dude, we can see in weekly chart the form of head and shouder appear, and H4 stay rangging i think next week is become true …

    • cyclopip

      Thanks bud! I hope so too.

  • Mahmood Riaz

    keeping in mind piponomics yesterdays review about three reasons for dumping aussie…m confused n out of this

    • Amit Desai

      That is why you should do your own research. Also, if you look at the quarterly performances on this blog, you may want to *really* do your own research…

  • Bijoymj

    I will join the party after some time. Planning to short at 1.2590 on a break of current trend line in 4 hour chart.

    • cyclopip

      Nice trend line you drew there, Bijoymj! Hoping it continues to make new lows!