The daily chart for EUR/AUD is displaying the potential end of a bullish Gartley pattern once price hit the 1.50 mark at the end of last month. The bullish pattern shows that price respected the 1.4712 level early in April and triggered almost a 250-pip rally. Major support now comes from the 61.8% Fibonacci retracement level of the X to A leg, which also coincides with the 161.8% Fibonacci expansion level of the B to C move.
Last night, the Australian currency rallied across the board as the employment situation dramatically improved and China had solid trade data. Price is currently breaking down the 200-day SMA and if we see a daily close below 1.4864, a major downturn may occur. If 1.4700 is breached, the next downside target may be 1.4400. Since Mr. Draghi talked about easing in June, the euro will have almost an impossible time firming up.
If price stalls around these current levels and is unable to make new lows or recapture the 200-day SMA level, we may see range trading between 1.4750 and 1.50. Further upside may target 1.5163, but it will be difficult for price to make further gains beyond that.
The trade: Sell AUD/JPY at 147.85 with a stop loss at 146.85 and a take profit at 148.20. The Risk/Reward Ratio is 1:3
Edward J. Moya
WorldWideMarkets Online Trading