With my the usual swing opportunities looking bare at the moment, I’m looking at a short-term play on potential volatility coming up on EUR/AUD.
Short-Term Event Trade On EUR/AUD
Lately I’ve been bearish on the Aussie, as explained in my AUD/NZD short trade, but I think we could see a potentially short term bullish move on the upcoming Australian jobs report.
The latest Australian Services PMI shows another round of growth in the services sector in June (Australia’s largest employment sector), as well as an uptick in the Manufacturing PMI data, so there’s a good chance we could get the expected positive read from the government’s monthly release on the employment situation, which is set to see a net gain of around 16K jobs versus 12K jobs in May.
With the odds on some positive news coming from Australia very soon (July 19, 2:30 am GMT), I’m taking a very short-term long position on the Aussie, this time against the euro since it is lacking in any major catalysts this week to potentially throw a wrench into price action if we do see positive Aussie data and reaction.
My framework for my entry and exits is on the 4-hour chart of EUR/AUD, which shows above that the pair has been trading between 1.5700 – 1.5850 over the past month. The pair is currently on its way higher, just about to retest the top of the range, which is where I’d like to set my short orders ahead of the Aussie jobs data because of the odds there will be technical sellers watching that area.
Since this is a shorter-term trade, I will be more conservative with my position size and and less ambitious with my target. My stop will be a little over the daily ATR to give the trade room to breathe around the event and my target will be around the middle of the range to take a quick profit. Here’s what I’m doing:
Short half position EUR/AUD at 1.5850, max stop at 1.5950, max target at 1.5750
I’ll be risking only 0.25% of my account on this position and with this setup, I have a 1:1 potential return-on-risk. Depending on what happens after the 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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