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What an unpredictable thing these markets are, eh?

They’re just like Pipcrawler’s bowel movements!

You’d think that since last week’s run of risk aversion was brought about by problems in the eurozone, we’d see the euro take a huge hit across the boards.

But as it turns out, the Aussie was even weaker than the euro!

EUR/AUD 4-hour Chart

Even with a spike in bond yields triggering another euro sell-off last Thursday, it still turned out to be more resilient than the Aussie.

So when EUR/AUD came knocking on the door of the rising trend line that I pointed out, guess who answered? Euro bulls!

They found support at the 1.2785 area of interest, and though sellers were able to make it a few pips below this level, buyers eventually prevailed and took the pair to new heights. I’m talking 200 pips higher to 1.3000, man!

Naturally, I closed my orders once I saw that price had turned and the uptrend had stayed intact. So right now, I’m back on the sidelines looking for a trade to take.

No worries though, as I think now’s a great time to take some time to reflect on current market conditions anyway. Are we seeing a legit reversal? Or is this just a temporary pullback on profit-taking?

Those are just some of the questions that are buggin’ this big head of mine.

In any case, if you have any trade suggestions, please help a monster out and feel throw them my way! Thanks fellas!

Trade Idea

EUR/AUD 4-hour Chart

One reason why I love trading the cross-currency pairs is that it gives me plenty of trading opportunities to choose from! If I have a short euro bias, I’m not forced to stick to just EUR/JPY – I can choose to go short on other euro pairs as long as a valid setup emerges!

Why am I bearish on the euro? Well, as I said in my last EUR/JPY trade, it’s all about politics right now baby!

The big news in the market right now is that our buddies over in Greece can’t just get along.

Because the New Democracy, Syriza, and Socialist parties couldn’t form a coalition government, the Greek government decided that they would be better off having another election in June.

This puts Greece in a rather dangerous situation, as the country won’t be able to receive any bailout funds from the EU and IMF. Take note that Greece has no more moolah in its vaults and without aid, it will run out of money by July.

As expected, this has been taking its toll on the euro, which is why the shared currency has struggled against other major currencies.

This brings me to my trade setup on EUR/AUD.

The pair has been respecting a long-term rising trend line for quite some time now, but seeing as how the outlook for the euro is looking rather dim, I have a feeling that the trend line could break soon.

For now, I’m going to be patient and wait for a BREAK of the trend line before establishing my short position. I think if the price breaks below the recent support level at 1.2785, we could see a smooth ride back down to the former area of interest around 1.2600.

Here’s my master plan:

Sell stop order at 1.2760, stop loss at 1.2830, take profit at 1.2600.

I think this should give my trade ample breathing space should we see any choppy moves.

Also, I think my profit target is well-placed, and if it gets hit, this trade will give me a sweet reward-to-risk ratio of just over 2:1. Lastly, I’ll be risking 0.50% of my account on this trade.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.