During the last week of trade, the EUR/AUD daily chart shown above has continued to trade within a moderate range between its 100-day and 200-day Simple Moving Averages (SMA). The indecision of the next major move comes as a battle is spurring between two key technical patterns.
On March 26th, price action appeared to break down below the neckline of what could be a head-and-shoulders pattern. That move also coincided with the taking out of the psychological 1.50 handle. If sellers emerge victorious over the next couple weeks, we may see a test of the 1.4426 area. Eventually, a decline towards the 1.40 zone may be targeted.
Last week’s bearish move on the pair appeared to have stalled on Friday as price tentatively created a bullish Gartley pattern. The symmetry is not optimal, but the reaction thus far appears to have triggered at the very least a small reversal. If bullish momentum persists key resistance will once again come from the 100-day SMA which currently resides at 1.5159.
With Chinese stimulus potentially right around the corner, I choose to take the side of the Australian currency for the next couple weeks.
The trade: Sell EUR/AUD at 1.5060 with a stop loss at 1.5180 and a take profit at 1.4700. The Risk/Reward Ratio is 1:3
Edward J. Moya
WorldWideMarkets Online Trading