Waiting for a Chance to Short EUR/AUD

While waiting for my long-term trade idea on AUD/JPY to get triggered, I decided to browse through the currency crosses to find another chance to buy the Australian dollar. You see, I have a bullish bias for this particular currency because Australia’s latest jobs report has been very strong. On the other hand, I’m bearish on the euro because the ECB is considering increasing their stimulus efforts in order to keep the euro weak and ward off deflation.

EUR/AUD 1-hour Forex Chart

EUR/AUD 1-hour Forex Chart

As you can see from the chart above, the pair is still on a downtrend but is currently finding support at the bottom of the descending channel with stochastic moving out of the oversold region. While a long trade may seem like a technically sound idea at the moment, it doesn’t line up with my fundamental bias which tells me that a short position might have a higher probability of going my way.

With that, I’m waiting for the pair to move up to the top of the channel near the 1.4800 major psychological resistance for an opportunity to short. Of course I’ll check if my fundamental bias is still valid once that test of resistance takes place and I’ll wait for stochastic to reach the overbought zone before jumping in.

I haven’t set my entry orders for now but I plan to set a 100-pip stop and aim for the 1.4600 to 1.4650 levels around the bottom of the channel for roughly a 2:1 trade. I’d love to get your feedback on this trade idea so please share your thoughts in the comment box below.

Cheers!

Happy time

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  • ForExchange

    Hi Happy Pip,

    I like your setup how you combine fundamental thoughts with technical analysis. I only have a question to your trading “divergence” (?). Is it not bad that you have AUD long position in many currencys? Is it not too much risk for you that you want to play the “same game” at the same time for more currency pairs? You can win but lose quite a lot at the same time I guess.

    Good luck

    • Irfan Hussain

      :) I liked your comment :)

    • Happy Pip

      Well I do have a long Aussie bias but I haven’t taken any of the setups yet since I’m still waiting for confirmation. I hold a general bias for AUD but I have yet to decide which particular technical setup lines up with it better and I won’t be taking both at the same time since it would indeed “double” my risk. Thanks for the feedback!

  • Jake

    I was looking at the EUR/AUD trade idea a few days ago. I’m going to hold off on selling for now as it still looks very over-sold right now and needs to have a good pull-back before I will consider shorting this pair.

    Good luck :)

    • Happy Pip

      Good call! It looks like EUR is still going very strong! I might wait for a much larger pullback myself. Thanks for sharing your thoughts!

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