It looks like EUR/AUD is hesitating to head further south so I’m booking my profits right here while staying on the lookout for another break lower. Make sure you check out my initial short trade idea before reading on!
The pair broke below its long-term triangle support at the 1.4450 last week but euro bears seem to have run out of steam for now. On the short-term time frames, EUR/AUD is stuck in a tight triangle consolidation pattern, which suggests that buyers are putting up a good fight and might even take price up for a retest of the broken support.
Besides, euro zone PMIs came in mostly stronger than expected yesterday, giving euro bulls more fuel to take the pair higher. Germany’s IFO business climate index is due today and another strong result could mean more gains for the shared currency. To top it off, ECB head Draghi has a speech scheduled today and this might spark volatility for euro pairs.
I’m still keeping a bearish bias on this pair, though, since the ECB is much more dovish compared to the relatively neutral RBA. Australia has its quarterly CPI report due midweek and analysts are expecting to see a slightly stronger pickup in price levels, which might be enough to confirm that the Australian central bank doesn’t need to lower rates anytime soon.
If so, I’ll be ready to hop in a new short position on a break of the short-term consolidation pattern, which is starting to appear like a bearish flag. But if EUR/AUD pops higher this week, I’ll keep my eyes peeled for reversal candlesticks around the broken triangle bottom at 1.4450 to see if it might hold as resistance.
Here’s what I ended up with:
P/L: +60 pips / +0.04%
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.
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