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It’s rare that we get so many clean technical setups as what I see in EUR/AUD on the daily timeframe, but with a major event this weekend, it’s watch mode for now.

EUR/AUD Channel Lower

EUR/AUD Daily Forex Chart
EUR/AUD Daily Forex Chart

I’ve been  watching EUR/AUD for a while now, waiting for the perfect opportunity to take a short position to play the longer-term trend lower and the positive carry bias in favor of the Australian dollar over the euro.  And now, it looks like I get three technical arguments that may draw in the sellers very soon:

  1. Bearish divergence between price action and the stochastic indicator
  2. Retest of the top of the falling channel
  3. Retest of the 200 simple moving average, which was a reversal point twice in the past year

Technical setups like these don’t come around often and should be taken advantage of right away, but unfortunately, it’s not one I can jump on just yet.

This weekend, we’ve got the first step towards potentially major leadership change in Europe this year; more specifically, the first round of voting for the next French President. This could be a major mover for the euro because depending on who wins, we could see France possibly make moves to leave the European Union. And based on what happened with Sterling during the Brexit saga, France potentially leaving wouldn’t be a small hiccup in volatility for the shared currency.

Marine Le Pen and Jean-Luc Mélenchon are a couple of the front runners whose agenda would likely include pulling France from the EU, and if either of them come out on top of this first round, we could see the euro under pressure. If they don’t come out on top, then there could be a bullish reaction in the euro.

As we saw with the U.S. Presidential election just this past year, you don’t know who is going to come out on top until all the votes are in.  So for now, I’m going to avoid new positions in European currencies, at least until we get past this first round. I’ll see how it all plays out and potentially hop in next week if the situation turns out in favor of a bear euro move.

Until then, stay tuned and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

Risk Disclosure
Pipcrawler’s Q1 2017 Blog Trading Performance

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