20 Jun EUR AUD Outlook; 21st June 2013
EUR:AUD has had some interesting moves over the last couple of Years, some of which were technically quite simple to catch and resulted in significant moves.
The Daily chart below shows historic analysis that I applied to the chart before trading it and you can see that 4 horizontal lines and 2 vertical lines was all it took!
To explain further you can see that between October 2010 and December 2011 price remained range bound in the top left of the chart. When it eventually broke down from this range I made the decision not to trade it until price retested the range. After quite a long wait the re-test came in May 2012 as defined by the first red circle. I call such set-ups “Box Trades” simply because price has retested the annotated box that previously contained price before it broke down.
From then on I calculated a measured move downside target through simply measuring the distance between the highest and lowest points of the upper range and applying the same distance to the lower part of the chart. This gave a nice round target of 1.160 which was achieved almost to the pip in August 2012 as defined by the second red circle.
Since then price has rallied quite significantly and is currently poking through the top of the old 2011 range. It is fair to expect some resistance here although there isn’t solid evidence of resistance as I type, nonetheless I did enter a speculative short today and I’m looking for MACD to cross down before making a higher high. If MACD makes another high then chances are this potential resistance level wont manage to reverse price.
So we have 2 potential outcomes here (All set-ups do I guess!). The first being that we see a retrace from the current level targeting the middle of the old 2011 trading range and the 2nd possibility is that price continues upwards. If it does continue higher, the idea then would be to wait for a retest of 1.4270 which should become support and therefore a buying opportunity.
This chart explains the simplicity of all of the above:
My speculative short is clearly risky (silly really considering how many low risk set-ups I’ve not traded this Year), but will give me a better feel as to how the market is moving, and if the trade does fail and EUR:AUD continues to rally, I’ll almost certainly look to being a buyer when price comes back down to retest 1.4270