As Big Pippin suggested in today’s edition of Daily Forex Chart Art, I’ve decided to take another shot with a EUR/AUD trade idea and I’m crossing my fingers that it works out better this time!
You see, my earlier EUR/AUD short didn’t turn out so well, as I decided to cut losses before price eventually moved in my favor. I’ve been bummed out about this for a while, but I guess there’s no use crying over spilled milk, right? I’m gonna give EUR/AUD another try with this retracement setup:
On its 1-hour forex time frame, EUR/AUD is showing signs of pulling back from its selloff, possibly until the Fibonacci retracement levels. The 61.8% Fib looks like a good entry area, as it lines up with a broken support zone around the 1.4400 major psychological level. I’ll be watching out for reversal candlesticks in that sell area and I’ll have a wider stop this time around.
As for fundamentals, I’m thinking that speculations of further ECB easing in their monetary policy statement this week might drive the euro lower against its counterparts. Even if Draghi and his men don’t announce any actual changes for now, they are still widely expected to maintain their dovish rhetoric and drop hints about increasing stimulus in their next meetings.
Meanwhile, the Australian dollar could stay supported, thanks to the positive economic outlook spurred by the latest jobs release. Data from China has been mostly better than expected, as the GDP showed 7.3% growth for Q4 while retail sales marked an 11.9% annualized gain. Industrial production chalked up an impressive 7.9% year-over-year increase, stronger than the projected 7.4% rise. These could lead to stronger demand for Australia’s commodity exports down the line and even shore up risk appetite.
Here’s my plan:
Short EUR/AUD around 1.4400, stop loss at 1.4600, initial profit target at 1.4000. I’ll be risking 1% of my account on this trade so make sure you read our risk disclosure if you’re thinking of joining me!
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