Forex Trade Idea: EUR/AUD Divergence Play

Third time’s the charm for EUR/AUD? This particular cross pair hasn’t exactly been my BFF, as I got burned a couple of times trying to trade it. I think this latest trade idea of mine might fare much better though.

EUR/AUD 4-hour Forex Chart

EUR/AUD 4-hour Forex Chart

As Big Pippin shared in today’s Daily Forex Chart Art, the pair is revving up for another test of the falling trend line resistance, which has been holding since the start of 2014. On top of that, a bearish divergence is forming, although stochastic hasn’t crossed down from the overbought zone yet.

I’m seeing a pretty large sell area around the trend line and the Fibs, but I’m planning on setting my short order at the 61.8% level, which is right smack at the 1.4600 major psychological level. If I’m able to short there, I’ll set my stop at the previous swing high or 1.4750 then aim for the previous lows for my first PT.

Fundamentally speaking, the euro is still in a much weaker spot compared to the Aussie, as the ECB is on a rate cut spree. The RBA, on the other hand, did mention that it plans to maintain its accommodative policy for the time being as the Australian economy might face headwinds with the government spending cuts. They’re not looking to cut interest rates or ease policy anytime soon though!

Here are my trade details:

Short EUR/AUD at 1.4600, stop loss at 1.4750, profit target at 1.4400. I’ll be risking 0.5% of my account on this trade. Make sure you read our risk disclosure if you’re thinking of trading this one, too!

Cheers,

Happy time

Other Popular Articles:

What is the STA strategy? Q1 2014 in Review Comdoll Trading Kit NZD/USD Trade