This week I’m taking a shot on EUR/AUD on a classic technical setup, to play potential volatility from upcoming European business sentiment data.
Will the European business data bring sellers back at better prices, or will the bulls break above the technical barriers to test this week’s highs?
EUR/AUD Fib Short Play
As mentioned above, we’ve got a pretty classic technical setup happening on the EUR/AUD one hour chart that I think could be good for some swing trade pips. Up above, we can see that the Aussie had a pretty strong bull run against the euro recently, enough so to break a rising ‘lows’ pattern and spark strong downside momentum. After bottoming out around 1.6100 this week, the pair bounced a bit to retest the Fibonacci retracment area of the recent swing move lower. The question now is, “will it draw in the bears once again?”
Personally, I think the odds are better than even traders will take a bearish shot on the pair as the massive EU stimulus deal didn’t do much to raise the euro against the Aussie, and on my expectations that tomorrow’s Euro zone PMI data could disappoint given the rising COVID-19 concerns across the globe. I could be wrong on this, but I think still have an Ace in the hole with this idea as global risk sentiment wants to stay positive as COVID-19 vaccine news continues to keep traders more risk-on than risk-off.
With that expectation, I’m taking a short-term tactical trade on EUR/AUD, scaling into a short position starting at the current market levels. My second entry will be at a better price, if retested, around the rising trendline / 61% Fibonacci retracement area marked on the chart above.
My stop will be the above the rising trendline / Fib area, and my initial target where I will re-assess the trade will be the previous swing lows. Here’s what I’m doing:
Short half position EUR/AUD at market (1.6200), max stop at 1.6325 with 0.50% risk, initial target at 1.6000
Short half position EUR/AUD at 1.6295, max stop at 1.6325 with 0.50% risk, initial target at 1.6000
I’ll be risking only 1.00% of my account if both positions are triggered with an initial 5.7:1 potential R:R. I may close this trade after the European PMI updates if they are not favorable to my position. Stay tuned for that update or for an adjustment to close if the conditions for a long position no longer look favorable.
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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