With forex volatility picking up again, I decided to throw up orders to play potential pullback on EUR/AUD. Will the market bring an opportunity to play the downtrend at a better price?
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Going after my usual technical setup of playing a trend on pullback, this time expecting a little bit more of a shallow bounce. With central banks keeping easy money in the mix, including the FOMC’s downgrade of future rate hike expectations, I think risk-on traders will likely be less patient to wait for a higher bounce.
I’m probably in that camp, but with the Australian jobs number coming up, I will wait just a little bit longer by setting orders above the market, in case there is a bearish move in the Aussie during the potentially volatile release. So, I’ll look to scale up starting at the major psychological level, up to the 200 simple moving average, both likely being watched by forex traders as a potential short jump-in area. My stop will be above the Fibonacci retracement area, which should give me tons of room to breathe if the Aussie jobs number brings in quick moves to the market. And my max target is the major support area that drew in buyers for a couple of YEARS between 2013 to 2015. Here’s what I’m doing:
Short half position EUR/AUD at 1.5000, max stop at 1.5675, max profit target at 1.4100
Short half position EUR/AUD at 1.5300, max stop at 1.5675, max profit target at 1.4100
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 2.26:1 if both positions are triggered. 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!