My homegirl Happypip struck out on a short play in EUR/AUD, but I think it was a great idea because of the fundamental drivers. And with a little move higher, it becomes an interesting for a short once again to me.
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Looking around the shorter-term charts this week, I didn’t really see anything I liked at the moment, but on the higher-time frames, EUR/AUD looked interesting and it has a catalyst for volatility coming up soon.
This week we’ve got the Australian jobs data as a potential market mover for this pair, and while I don’t know whether or not we’ll see another better-than-expected number, the trend has been for mostly positive reads over the last couple of quarters. Even if it did disappoint, a push higher to the strong area of interest between 1.48 – 1.500 may draw in sellers to play the longer term bearish bias, as well as the potential for euro pain on the ongoing Greek-EU debate over austerity and bailout funds.
So, my trade idea for this week is a simple one. If the pair moves higher to the previous area interest, I’ll short a full position with a wide weekly ATR stop to keep me in the game if volatility spikes pretty high. My target is the previous swing low area and major psychological level that held and drew in enough buyers to change sentiment. Here’s what I am doing:
Short full position EUR/AUD at 1.4800, max stop at 1.5140, profit target at 1.4000
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2.35:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!