I’ve got my one good eye locked on another short euro setup with this EUR/AUD falling wedge formation. Think the comdolls can extend their rallies?
EUR/AUD Trade Idea
On the pair’s daily time frame, it can be seen that the pair is already testing the bottom of its falling wedge formation.
Price has been hovering around this 1.4100 support area for the past few months, and it looks like sellers are trying to push for a move lower. If that happens, EUR/AUD could fall by around a couple thousand pips, which is roughly the same height as the wedge formation.
If that happens, EUR/AUD could fall by around a couple thousand pips, which is roughly the same height as the wedge formation.
Zooming out to the weekly chart, I’m seeing a long-term area of interest at the 1.3800 major psychological level, which could work for an initial profit target. From there, the next potential floor is around the 1.3000 mark.
A part of me wishes that I could still catch a bounce to the wedge resistance around 1.4500 to short, but I’m also ready to hop in on a break of the 1.4100 mark.
As I’ve mentioned in my euro short trade watchlist posts, I’ve got a bearish bias on the shared currency mostly due to Brexit issues and how the bloc could also face a lot of uncertainty during the EU negotiations.
On the flip side, I’m Aussie bullish since sentiment for China has considerably improved after the latest PMI readings were printed.This could shore up demand for Australia’s raw material exports and boost iron ore prices.
To top it off, Australia’s latest jobs report just printed a higher than expected 13.5K gain in hiring while the participation rate improved to 64.7% to reflect stronger confidence in the labor market.
We’ve still got a couple of make-or-break events on deck this week, namely the ECB rate statement and the Chinese GDP release.
Any indication that Governor Draghi and his gang of policymakers aren’t looking to reduce stimulus anytime soon could drive the euro lower while stronger than expected growth figures from Australia’s top trade partner could spur another leg higher for the commodity currency.
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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