EURAUD: Short Term Support Line Failing as Pair Poised To Trade Lower
The medium term daily candle chart below shows the price history of the Euro Currency (EUR) versus the Australian Dollar (AUD). This currency pair is known as EURAUD, and is trading near 1.4377 around time of publication today.
In August when this pair was last reviewed in the Ideas You Can Trade series, the downside support targets of 1.4150 and 1.4050 were both subsequently hit, and may each become retested as the EURAUD gets bearish again.
Since that last post, the pair had recovered from lows near 1.3800 in early September and resistance was reached under 1.4600 before returning towards current prices.
Now that the pair is poised to trade lower, with the short term support line (dotted green channel on chart below) failing to hold the bullish pattern, a drop can be expected. However, if this support line is quickly recovered the bearish fate can be avoided, although a pullback to 1.4290 seems imminent.
If support is recovered the pair could get a lift back towards the barrier under 1.4600, although this latter scenario look less likely in the immediate short term.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.4463 with a Limit to take profit @ 1.4500 and a stop-loss @ 1.4427 Risk/Reward Summary: Limit risk = +37 pips profit / (-36) Stop-loss risk = Gain to Loss ratio = 1.02
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4339 with a Limit to take profit @ 1.4297 and a stop-loss @ 1.4369 Risk/Reward Summary: Limit risk = +42 pips profit / (-30) Stop-loss risk = Gain to Loss Ratio = 1.4
Medium Term Daily Candle Chart: