Forex Watch List: EUR/AUD and AUD/JPY Trends

I’m still feeling the rush from all those shopping sprees during the Thanksgiving holidays so I’m keeping my eyes locked on a couple of potentially good forex deals on EUR/AUD and AUD/JPY. As Forex Gump mentioned, there are a bunch of top-tier catalysts from Australia this week so that’s why I’m paying extra close attention to AUD pairs.

I’ve switched to a bullish bias on the Aussie after the RBA shifted to a less dovish stance in last month’s policy statement, as this suggests that they’re no longer looking to cut rates anytime soon. In addition, news that the IMF has granted the Chinese yuan reserve currency status could have a positive impact on China’s economy and Australia’s raw material commodity exports to the country.

I’ve already got a short GBP/AUD forex position goin’ on quite well so I’m making some profits on my bullish Aussie bias. I still think the upcoming releases could give it another push higher so I’m looking to diversify with other counter currencies. Here’s what I’ve got on my watch list:

EUR/AUD 1-hour Forex Chart

EUR/AUD 1-hour Forex Chart

For EUR/AUD, I’m seeing this descending channel that’s been holding for nearly a month already. Price just bounced off the resistance and looks ready to make its way to the bottom but I’m not comfortable with a countertrend play, so I’d rather wait to short at the top of the channel if volatility allows.

Aside from the AUD events, we’ve also got the ECB monetary policy decision lined up and forex analysts are already bracing themselves for additional stimulus measures. However, these expectations may have been priced in way too long already so a “buy the rumor, sell the news” scenario might occur, possibly allowing EUR/AUD to bounce back to the channel resistance before resuming its slide.

AUD/JPY 1-hour Forex Chart

AUD/JPY 1-hour Forex Chart

I’m also watching this rising trend line on AUD/JPY, waiting for a chance to hop in on a pullback. Stochastic is already indicating overbought conditions anyway, which suggests that buyers might take a break and allow sellers to take over for a while. I’m eyeing a potential long entry around the 89.00 major psychological level since we’ve also got a few medium-tier reports from Japan lined up.

What do you guys think of my forex trade setups? Am I about to get left behind by these strong trends or do you agree that I should stay patient in waiting for corrections? As always, I’d love to get your feedback on my ideas!

Cheers,

Happy time

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  • sheyi

    Great analysis, and I think you’re right to wait for the retracement.

    Question: EUR/AUD is in a pretty strong downtrenf and you’re waiting for it price to move up to the resistance before going short. But what is assuring you the downtrend will continue? Do you work on the basis that only news will carry enough weight to reverse the trend?

    • Thanks for checking out my blog and for sharing your thoughts!

      I’m basing my bearish EUR/AUD bias mostly on the divergence between the ECB and RBA policy stances, along with the economic performance/outlook of the euro zone vs. Australia. We did see a lot of volatility following the ECB statement but I do think that the downtrend might resume at some point.

      How about you, what’s your bias on this pair? 🙂

  • sheyi

    Hi,

    I don’t focus on this pair, but was interested in your analysis so that i could apply to the pairs that I’m looking at. Based on your response it seems like fundamental analysis plays a crucial.

    Can you point me in the direction of good data for fundamental analysis?

    • Thanks for checking out my blog! Yep, fundamental analysis plays a key role in determining forex trends, as it could help you figure out which currency would enjoy stronger demand. I suggest you check out Forex Gump’s Piponomics blog (http://www.babypips.com/blogs/piponomics) for in-depth economic analysis and Pip Diddy’s Pipnoculars blog for regular trading session updates (http://www.babypips.com/blogs/pipnoculars). Hope this helps and see ya around!