Waiting For Break of Trend Line on EUR/AUD – Orders Cancelled

Orders Cancelled: 2012-05-22 02:30

What an unpredictable thing these markets are, eh? They’re just like Pipcrawler‘s bowel movements!

You’d think that since last week’s run of risk aversion was brought about by problems in the euro zone, we’d see the euro take a huge hit across the boards. But as it turns out, the Aussie was even weaker than the euro!

EUR/AUD 4-hour Chart

Even with a spike in bond yields triggering another euro sell-off last Thursday, it still turned out to be more resilient than the Aussie. So when EUR/AUD came knocking on the door of the rising trend line that I pointed out, guess who answered? Euro bulls!

They found support at the 1.2785 area of interest, and though sellers were able to make it a few pips below this level, buyers eventually prevailed and took the pair to new heights. I’m talking 200 pips higher to 1.3000, man!

Naturally, I closed my orders once I saw that price had turned and the uptrend had stayed intact. So right now, I’m back on the sidelines looking for a trade to take.

No worries though, as I think now’s a great time to take some time to reflect on current market conditions anyway. Are we seeing a legit reversal? Or is this just a temporary pullback on profit-taking? Those are just some of the questions that are buggin’ this big head of mine.

In any case, if you have any trade suggestions, please help a monster out and feel throw them my way! Thanks fellas!

Trade Idea: 12-05-16 03:52

EUR/AUD 4-hour Chart

One reason why I love trading the cross-currency pairs is because it gives me plenty of trading opportunities to choose from! If I have a short euro bias, I’m not forced to stick to just EUR/JPY – I can choose to go short on other euro pairs as long as a valid setup emerges!

Why am I bearish on the euro? Well, as I said in my last EUR/JPY trade, it’s all about politics right now baby!

The big news in the market right now is that our buddies over at Greece can’t just get along. Because the New Democracy, Syriza, and Socialist parties couldn’t form a coalition government, the Greek government decided that they would be better off having another election in June.

This puts Greece in a rather dangerous situation, as the country won’t be able to receive any bailout funds from the EU and IMF. Take note that Greece has no more moolah in its vaults and without aid, it will run out of money by July.

As expected, this has been taking its toll on the euro, which is why the shared currency has struggled against other major currencies.

This brings me to my trade setup on EUR/AUD.

The pair has been respecting a long-term rising trend line for quite some time now, but seeing as how the outlook for the euro is looking rather dim, I have a feeling that the trend line could break soon.

For now, I’m going to be patient and wait for a BREAK of the trend line before establishing my short position. I think if price breaks below the recent support level at 1.2785, we could see a smooth ride back down to the former area of interest around 1.2600.

Here’s my master plan:

Sell stop order at 1.2760, stop loss at 1.2830, take profit at 1.2600.

I think this should give my trade ample breathing space should we see any choppy moves. Also, I think my profit target is well-placed, and if it gets hit, this trade will give me a sweet reward-to-risk ratio of just over 2:1. Lastly, I’ll be risking 0.50% of my account on this trade.

You fellas willing to join me on this trade?

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4 comments

  1. Derek Lim

    I have been in and out of this trade since last week. Shorted it last week when the shooting star appeared on the daily chart. Stop was placed at 1.293. Took a tiny profit before my position before reaching 1:1 as EURAUD keep bouncing off 1.2782. Shorted yesterday again @ 1.2850. Closed some of my position at 1.28. I am also looking towards the break of 1.2782.

    Reply
  2. cyclopipcyclopip Post author

    Quick update! EUR/AUD seems to be finding support and is now playing at around 1.2845. I might make changes to my plans and consider shorting in the area of 1.2900 (former resistance) if this rally continues.

    Reply
  3. alwjmonster

    hi cyclopip, i think the reason why AUD weak is because the drop of gold price for the past few days.

    Reply
    • cyclopipcyclopip Post author

      Yeah, I thought that might have been the reason. But I also noticed that we saw a strong rebound in gold prices on May 17 and 18 (the days that AUD recorded big losses against the EUR).

      Reply

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