Kicking off the week with mainly a short-term technical play with event catalyst, and once again on EUR/AUD. Will the range continue to stay intact?
Short-Term Range Play On EUR/AUD
I’m checking out EUR/AUD once again because we’ve got a couple of potential volatility jolts this week for the pair: the European Central Bank’s monetary policy meeting and Australia’s quarterly CPI release. Pip Diddy did his usual handy work on each event to provide us with some insights, and if you haven’t caught up already, click on the links above to understand these top tier events.
So, I’m not going to go into the fundies since my homie Diddy did a nice job, but overall, I’m banking on the Aussie CPI data possibly pushing the pair lower to the bottom of the channel and the ECB event could possibly draw in euro bulls if hints of policy tightening by the ECB outweighs their concerns highlighted in their meeting minutes.
If this scenario were to play out, I think longing just under the bottom of the range is a good entry point as it is likely watched buy technical traders, especially with stochastic nearing short-term oversold levels.
But since that ECB meeting has the potential to spark big volatility, I’m keeping my risk low (conservative entry & wide stop) in case the event turns out to be a big surprise and that range turns into a massive range breakout move. Here’s what I’m doing:
Long half position EUR/AUD at 1.5650, max stop at 1.5475, max target at 1.5850
I’ll be risking only 0.50% of my account on this position and with this setup, I have a little over than 1:1 potential return-on-risk. Depending on what happens after either event or if I even get triggered, I may adjust early to reduce risk or take profit if the situation makes sense.
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.
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