With the highly anticipated ECB monetary policy statement later this week it’s time we check out a couple of setups on euro pairs, and we’ll take a look at a consolidation pattern on GBP/AUD!
The European Central Bank is set to give its latest monetary policy statement this week, with expectations of a potentially big stimulus package on the way to support a weakening European economy. Whether or not we’ll get that package still remains to be seen given the mixed rhetoric from ECB officials recently, but whatever the decision may be, it’s highly likely we’ll see some action in the euro this week.
If you’re in the bear camp on the euro, then you may want to check out this downtrending pattern on EUR/JPY. And after a strong counter trend rally this past week, the market is retesting to top of the descending range on the four hour chart. With the stochastic already moving lower from over bought territory while price moves higher, we’re seeing a divergence that could signal the next move lower. And if so, the next potential area of support may not come until a test of the 115.00 handle, around 300 pips away!
If you’re a bull on the euro ahead of the ECB meeting and think risk sentiment could swing back to the negative soon, EUR/AUD should be at the top of your watchlist. This pair has been steadily grinding higher on the daily chart in a channel pattern, and the market is now about to retest the rising lows, somewhere in the area around 1.6000 to 1.6100. The stochastic indicator is already signaling potential oversold conditions on the higher time frame, making this a strong candidate for a longer-term swing position if the fundies can support a bullish move pretty soon. And with the next potential resistance area around the top of the channel (around 1.7000), we’re talking a potential 1000 pips gain if the ECB surprises with no big stimulative move.
Last but not least, let’s check out GBP/AUD, which is likely to make moves this week with top tier events ahead including Chinese inflation data, U.K. unemployment data and Australian sentiment data ahead. These updates have the potential to get traders moving on GBP/AUD, which has been consolidating towards 1.8000 over the past month.
What we’re seeing above in the four hour chart of GBP/AUD is a symmetrical triangle pattern in the works, and with the right combination of fundamental catalysts that pattern could actually be broken this week and lead to a fresh directional bias. If so, keep in mind that this is one of the most volatile currency pairs among the majors, moving over 170 pips on a daily basis and over 300 pips on a daily basis, which means that while there is a lot of opportunity to catch pips, there’s also just as big a risk to lose’em too. Manage risk accordingly!