Did I just get faked out? The long-term range support on EUR/AUD seems to be holding again so I might need to close this one early and trim my losses. What do you think? Before reading on, make sure you look at my initial trade idea.
I was watching a long-term falling wedge on the daily time frame and it looked like price was breaking below the bottom. However, zooming in to the 4-hour chart reveals that the pair has been able to make its way back above the floor and might even gun for the ceiling with this small double bottom formation right on the 1.4100 handle.
In hindsight, I should’ve been more patient with my market entry or probably waited for a convincing break and pullback to the 1.4100 mark. At that time, though, the positive sentiment for China and the comdolls was looking strong while the euro was reeling from Brexit-related updates and expectations of a downbeat ECB statement.
Governor Draghi wasn’t as dovish as expected during the ECB presser, allowing the euro to breathe a sigh of relief. And earlier today, China reported a dip in its official manufacturing PMI from 51.4 to 51.3, spurring a selloff for the Australian dollar on expectations of weaker demand for its commodity exports.
For now, I’m keeping my one good eye locked on the 1.4300 mark or the double bottom neckline, ready to close if price breaks past this area. I’ll be taking in a 220-pip loss or a 0.20% dent on my account in this case. 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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