Forex Trade Idea: 2014-06-10
For this week, I’m going to nibble on a simple support break setup on EUR/AUD. Is this the beginning of another leg lower?
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Since the ECB delivered on the much anticipated rate cuts hinted on back in May, it’s been a wild ride for the euro. Now that the markets have had a few days to reposition, I think the trend lower in EUR/AUD may continue.
Technically, we’re getting signs that forex traders are still in sell mode as the pair broke and is holding below the strong support levels around 1.4560 mid-May. For me, I think it’s a good time to nibble into a short position on the recent change in ECB policy (most likely euro negative) and ahead of what could be another better-than-expected Australian Jobs number this week; at the very least, the interest rate differential favors the Aussie in this pair.
And just in case we do see a weak jobs report for the Aussie, I’ve decided to be conservative by splitting up my entries between current levels and the previous swing highs to give myself a better average entry price to play the trend lower. My profit target is the previous major support last seen in November 2013. Here’s what I am doing:
Short half position at market (1.4511), stop at 1.4805, profit target at 1.4150
Short half position at 1.4700, stop at 1.4805, profit target at 1.4150
I’m risking a full 1% of my account on this trade, and if both entries are triggered, this trade structure has a potential 2.2:1 return-on-risk. If I don’t get my second entry, I’ll be on the lookout to add to my position and trail my stop if it goes my way to maximize my profit potential.
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