New Trend Forming on EUR/AUD? – Trade Closed

Trade Closed: 05-06-2012 00:29

EUR/AUD 4-hour Chart

It seems like I picked a bad time to short the euro. By the time my sell order was triggered, the markets were already exhausted from selling off!

What’s funny is that there was actually a moment when it looked like I wasn’t going to get triggered. The pair had flirted with the 1.2785 handle, but turned just a few pips short of it, eventually bottoming out at around 1.2700.

But the euro remained resilient against the Aussie, as the Aussie was bogged down by weak data (retail sales and building approvals) and the prospect of a rate cut. What really did me in, though, was the weak U.S. NFP data on Friday, which saw the pair rally past the 1.2785 level (which I thought would act as resistance).

The pair climbed right past the 38.2% Fib at 1.2800, and hit my stop loss.

Stopped out at 1.2855: – 70 pips / -0.50%.

Drats! In retrospect, I probably should’ve cancelled my sell order when price reached the 1.2700 handle. I guess I should just chalk this one up to experience.

Luckily, I was able to completely offset this small loss with a win on my EUR/GBP trade. But I’ll leave that story for an update tomorrow. Stay tuned, my friends!

Trade Idea: 30-05-2012 03:14:15

EUR/AUD 4-hour Chart

By now, you should all know how weak the euro has been. With Greece edging closer to exiting the euro zone and Spain now needing bailout funds to keep its banks afloat, the euro has been in a tailspin, losing against all other major currencies.

To be honest, I think we could see even more weakness in the euro over the next few weeks. Yes, the New Democracy party may be in the lead, but didn’t they also win the last election?

The problem isn’t winning the most seats – it’s forming a coalition! As long as Syriza wins enough seats to prevent the New Democracy and Socialists’ parties from a majority government, then the possibility of a Grexit remains very, very real.

This brings me back to EUR/AUD. Remember that short setup I wanted to take a few weeks back? Well, the pair just broke through the long-term rising trend line and support at 1.2785!

I think the break of the trend line is a strong signal to have a bearish bias on this pair. After all, that trend line had been holding since the beginning of the year!

I’ve popped on the Fib tool to help me find a good entry point to establish a short position. As it turns out, the 38.2% Fib level lines up closely with the potential support-turned-resistance 1.2785 level! Looks like an excellent area to set my short orders!

Here’s what I’m planning to do:

Short EUR/AUD at 1.2785, stop at 1.2855, take profit at 1.2600.

Now, you may have noticed that I’m going with a relatively tight stop and putting it just above the 50.0% Fib level. The reason I’m doing this is because if price manages to pierce through the area of interest at 1.2785, I really think we’ll see some choppy trading from this pair.

As for my profit target, I’m aiming for former support at around 1.2600. This gives me a great reward-to-risk ratio of 2.6:1.

Lastly, I’ll be risking just 0.50% of my account on this trade.

What do you, my endearing fans, think of this trade setup? Answer the poll or leave your thoughts and suggestions in the comment box below!

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  • Lilpixie

    i have entered at 1.27852 and is already 12.8 pips now =)

    • cyclopip

      Great timing, bro! Seems like I just played this trade a bit too tight.

  • Nick Nelson

    Entered at 1.1764 with a stop at 1.2815

    • cyclopip

       Do you mean 1.2764? So far, the euro has been resilient against the AUD, but I don’t think this will last. Good luck, buddy! :)

      • Nick Nelson

        Yes 1.2764.. nice spot on the setup, I am up 20 pips right now. Your post made me think I entered too early, but we will see. There are some support turned resistance lines and the first fibo line in my favor so hopefully it carries downwards through the night!

      • Nick Nelson

        And I generally hold my trades from 8 hours to a day. I am targeting 1.27ish. 8 hour chart says oversold, but it’s the euro right now…. no such thing! ha.

        • cyclopip

          Yup! With the euro forging new lows day after day, it’s hard to say that it’s “oversold.” Haha!