While waiting for my long-term trade idea on AUD/JPY to get triggered, I decided to browse through the currency crosses to find another chance to buy the Australian dollar. You see, I have a bullish bias for this particular currency because Australia’s latest jobs report has been very strong. On the other hand, I’m bearish on the euro because the ECB is considering increasing their stimulus efforts in order to keep the euro weak and ward off deflation.
As you can see from the chart above, the pair is still on a downtrend but is currently finding support at the bottom of the descending channel with stochastic moving out of the oversold region. While a long trade may seem like a technically sound idea at the moment, it doesn’t line up with my fundamental bias which tells me that a short position might have a higher probability of going my way.
With that, I’m waiting for the pair to move up to the top of the channel near the 1.4800 major psychological resistance for an opportunity to short. Of course I’ll check if my fundamental bias is still valid once that test of resistance takes place and I’ll wait for stochastic to reach the overbought zone before jumping in.
I haven’t set my entry orders for now but I plan to set a 100-pip stop and aim for the 1.4600 to 1.4650 levels around the bottom of the channel for roughly a 2:1 trade. I’d love to get your feedback on this trade idea so please share your thoughts in the comment box below.
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