EURAUD: Resistance Line of Bearish Channel Putting Selling Pressure on Prices
The medium term daily candle chart below shows the history of the Euro Currency (EUR) versus the Australian Dollar (AUD). This currency pair is known as EURAUD, and trading near 1.4727 (around time of publication). The pair was just near the low of the last five consecutive trading days - around 1.4740 - where support failed to be maintained.
The upper resistance line of the medium term bearish channel (point 4 in magenta color on chart below) has been pushing prices lower and still appears intact looking at the latest price action of the week that just passed - as EURAUD was unable to breakout above that line.
Last time EURAUD was covered in the Ideas You Can Trade series the same bearish momentum was pushing the pair towards 1.4600, and shortly thereafter a low near 1.4560 was made, before rebounding towards current levels.
A short term bullish trend line drawn from that low (of May 15, 2014) towards today's low, shows that the pair may be on an upward path to test the resistance line of the medium term bearish channel again. If this [resistance] line can be overcome a bullish reversal should follow, whereas if resistance is able to hold, then prices should continue lower with 1.4650 the next target.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.4808 with a Limit to take profit @ 1.4873 and a stop-loss @ 1.4768 Risk/Reward Summary: Limit risk = +65 pips profit / (-40) Stop-loss risk = Gain to Loss ratio = 1.62
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4698 with a Limit to take profit @ 1.4651 and a stop-loss @ 1.4732 Risk/Reward Summary: Limit risk = +47 pips profit / (-34) Stop-loss risk = Gain to Loss Ratio = 1.38
Medium Term Daily Candle Chart: