Euro Aussie Trading Strategy: Pinpointing the Entry

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EURAUD Technical Analysis

We have been monitoring EURAUD and EURNZD throughout the day. Both currency pairs appear to provide a technical entry but in order to set a conservative risk management we are not issuing trade alerts for both pairs. It is a difficult task to determine whether the technical patterns we have noted are due to a strong Euro or weak commodity currencies. One possibility that we have entertained is the People’s Bank of China (PBOC) resuming its currency devaluation, which previously lead to moderate selling in both AUD and NZD in the Forex market. We must highlight there is no affirmation this will indeed be the case.

We have decided to focus on EURAUD as the interest rate in Australia is lower, which interprets into lower costs of holding the long trade at the rollover.

EURAUD Daily Chart

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EURAUD Daily Chart 08/10/15

EURAUD Daily Chart 08/10/15

EURAUD 4hr Chart

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EURAUD 4hr Chart 08/10/15

EURAUD 4hr Chart 08/10/15

As you may see from the daily chart Euro Aussie found support at 1.5588 in a potential bullish flag. Basing the trade solely on the daily means the protective stop must be layered beneath the support (approximately +220 pips). In order to enhance the risk reward ratio of the signal we derived we are using the 4hr chart.

We noted the potential for reversed Head-And-Shoulders (H&S) on the 4hr chart that allows us to opt for a tighter stop. However, the recent gains in EURAUD means we may incur a retracement towards 1.5585 before the gains materialize. We cannot determine with great certainty the retracement will indeed take place but it must be acknowledged. Another scenario that needs to be acknowledged is that our decision not to wait for the weekly close may mean the trade will only be profitable at the beginning of next week.  The reason why we are nevertheless entering at market price is due to the fact the 1.5611 may hold and yield corrective gains within the next 24 hours.

EURAUD Trade Alert Details

EURAUD long at market price (1.5650)
Take profit: 1.6028
Protective stop: 1.5555
Risk Ratio (RR):  1 : 3 (approx.)
Estimate duration: 7 days

08/10/15 UPDATE: The auctions that are taking place in US markets are behind the recent gains in the commodity currencies.  Although we did not rule out a limited drawdown we did not expect it to materialize as soon as we issue the trade. As long as EURAUD is above 1.5589 our bullish projection remains valid.

08/10/15 UPDATE II: if the price does not correct near our entry before the FOMC statement we are preparing for the possibility the market could trigger the protective stop as we do not have a safe distance from the market.

08/10/15 UPDATE III: EURAUD triggered the protective stop loss order of the long trade. There was a battle around the support but in light of the FOMC statement the support gave way.

Euro Aussie Trading Strategy: Pinpointing the Entry

As EURAUD long trade is closed this page can  now be accessed by all traders. Open trades are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
Euro Aussie Trading Strategy: Pinpointing the Entry

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Euro Aussie Trading Strategy: Pinpointing the Entry

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Euro Aussie Trading Strategy: Pinpointing the Entry