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Woohoo! This short play is finally showin’ me some love, as price gained further bearish momentum and is closing in on my first profit target. Time to press my advantage? In case you missed it, better check out my initial trade idea and adjustments.

EUR/AUD Short Trade

I hopped in this short position on a breakdown of a falling wedge formation, which I feared to be a fake out. The pair soon resumed its downtrend after the RBA decision sounded less dovish than expected, with policymakers hinting that they’re done cutting rates for now. Although their official statement still contained some concerns about labor market indicators and the AUD’s trading levels, market players focused on the upbeat assessment of commodity prices and demand from China.

In contrast, the euro has been reeling these days due to resurfacing Greek debt problems. You see, the debt-ridden nation is currently on its third bailout but still needs the IMF to assess that it has made progress in economic reforms before it can secure the next tranche of funds. Now Greece needs these funds, all 86 billion EUR of it, in order to make good on its upcoming debt obligation of 7.2 billion EUR, but IMF head Lagarde seems less inclined to be lenient.

EUR/AUD Weekly Forex Chart
EUR/AUD Weekly Forex Chart

Because of that, EUR/AUD seems to be headed much further south, possibly breaking below the near-term support at 1.3800 and heading straight for my ultimate target near 1.3000. Of course this still hinges on how Greek bailout talks pan out in the coming days, particularly during the meeting of euro zone leaders in Brussels next week.

The odds are still in the Aussie’s favor, as the Land Down Under just printed an improvement in its NAB business confidence index from 6 to 10 for January while China reported stronger than expected inflation readings. Headline CPI advanced from 2.1% to 2.5%, outpacing the consensus at 2.4%,while PPI is suggesting stronger price pressures down the line by jumping from 5.5% to 6.9% year-over-year in January.

With potential risks lined up, I’ve decided to roll my stop down to 1.4015 to lock in some gains. I’m also considering adding to my position on a strong break of 1.3800 but this largely depends on what kind of catalysts spur the move. For now, my adjustments can allow me to bag at least 65 pips or a 0.06% gain on my account.

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.

Q4 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.