Trade Idea: EUR/AUD Double Top

We’ve got central bank events in the euro zone and Australia this week so I’m looking at this reversal pattern on EUR/AUD. What do you guys think?

On the pair’s daily time frame, I’m seeing a double top formation with price already testing the neckline around the 1.4500 major psychological mark. The chart pattern is approximately 1,500 pips tall so the resulting breakdown might be of the same size.

EUR/AUD Daily Forex Chart

EUR/AUD Daily Forex Chart

So far, fundamentals are favoring Aussie strength since iron ore prices have been climbing. On the other hand, the euro is looking weaker with Greek debt concerns looming and ECB officials hinting that there’s scope for further easing.

For today, we’ve got the release of the RBA meeting minutes on tap. During their actual statement earlier this month, policymakers noted that there have been improvements in commodity prices, financial market sentiment, and domestic rebalancing. However, RBA officials also cautioned that an “appreciating exchange rate could complicate the adjustment underway in the economy.”

Still, a generally upbeat rhetoric from their discussions could allow the Aussie to advance against the euro, which might be weighed down by ECB dovishness on Thursday.

EUR/AUD Weekly Forex Chart

EUR/AUD Weekly Forex Chart

I haven’t set any actual orders yet since I’m a bit worried about this long-term rising trend line visible on the weekly chart, but I’ll be ready to hop in at market if a long red candle forms. I’m eyeing a possible short around the 1.4400 levels with a wide stop above the double top neckline and weekly trend line and a large profit target.

Do you think we’ll see a break lower or is another bounce about to take place? As always, I’d love to get your feedback on my ideas!

Cheers,

Happy time

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