The Aussie may be enjoying some support for now, but I’ve got a feeling we’re just seeing the tip of the iceberg in this trade spat between the U.S. and China. Here’s my plan if tensions escalate.
Long EUR/AUD Idea
This pair is still trading safely inside its ascending channel visible on the 4-hour time frame and appears to be prepping for a test of support.
Buyers could be waiting at this area since it lines up with the 61.8% Fibonacci retracement level and the 1.5850 minor psychological mark. Stochastic is pointing down but is hovering close to oversold levels to signal that sellers are a bit exhausted.
Last time I checked, China was quick on its feet in issuing a couple of sets of U.S. products to slap higher trade duties on. Officials have been reiterating that they won’t back down, which means that a full-blown trade war remains a possibility and riskier assets could be hardest hit by escalating tensions.
As for the euro, flash CPI readings have been weaker than expected, which is currently weighing on ECB rate hike hopes. Still, it’s worth noting that most of the region’s data has been reflecting consistent improvements and that the euro often enjoys some safe-haven appeal when things turn sour elsewhere in the world.
I’m looking to go long around the 1.5850 level with a tight stop below the channel bottom or the 1.5800 mark. I’ll probably hold out for reversal candlesticks at this area, though, to see if I could jump in at market or abandon this idea completely if risk appetite keeps surging.
What do you guys think?
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