Partner Center Find a Broker

I’m already starting to round up my numbers for the year, yet I couldn’t help but notice this neat channel setup on EUR/AUD. Think it’s worth a last-minute play?

EUR/AUD Trade Setup

I’ve been looking for opportunities to short the euro ever since the ECB announced an extension of its QE program end-date to December 2017, so you can imagine my excitement when EUR/AUD failed to break below the 1.4100 handle then popped back up to the 1.4400 area instead.

I’m seeing a bit of a range on the longer-term charts but there seems to be a descending channel forming in the 1-hour time frame when you connect the latest highs and lows. Price is starting to turn lower, possibly setting its sights back on the channel support around 1.4050-1.4100 from here.

EUR/AUD 1-hour Forex Chart
EUR/AUD 1-hour Forex Chart

However, I’m a bit concerned that stochastic is indicating oversold conditions and is starting to turn higher. This could mean that another test of the 1.4400 channel resistance might be in order or that bulls are ready to push for more gains. Besides, I’m also seeing broad-based Aussie weakness these days, as tense U.S.-China relations and the weak yuan have been dragging the commodity currency down.

Still, the euro zone has a lot more problems on its plate more than ever, with the recent terror attacks in Germany, Switzerland, and Turkey taking a huge toll on investor confidence in the region. To top it off, Italy isn’t out of the woods with its banking sector troubles yet while upcoming elections next year could keep uncertainty on the table.

I’m hoping to catch another test of the channel resistance to short and I plan on setting my stop past the 1.4500 major psychological level. I’ll be aiming for the bottom of the channel near 1.4100 area but I’ll be ready to move my stop to entry once price tests the mid-channel area of interest around 1.4200. Make sure you’re following me on Twitter to stay in the loop if I’ve hopped in!

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.

Q3 2016 Trading Performance Review
Read about my trading framework
Risk Disclosure

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.