Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
With most of the action in USD pairs, it's easy to overlook the crosses. But sometimes, that's exactly where the biggest opportunities are.
For instance, EURAUD looks particularly interesting as it could be about to start a new bullish leg. The pair is in a downtrend since the March turbulences in risky assets, but that may change soon.
The prospects for a higher EURAUD exchange rate over the coming days and weeks are based on two premises as a function of EURUSD and AUDUSD:
- EURUSD price action is strongly bullish, resembling the stellar 2017 rallies in some ways. It seems little can deter the bulls from taking EURUSD toward the 1.16-1.17 area.
- AUDUSD has reached the major 0.70 monthly resistance area and is high in overbought territory. A broader correction in risky assets is long overdue, and if it happens, it should take the Aussie down as well.
Daily chart:
The daily chart shows the sharp moves over the past 3 months (V-shape top reversal). We can also see that the 1.60 area is an important technical zone EURAUD found support there 4 times in 2019.
If it continues higher here, EURAUD will soon test the resistance trendline of the downward channel at 1.6550. The 200-day moving average (red line) and last month's lows are also in this area.
The bounce at 1.60 this week may be the low of the cycle, or EURAUD may make another attempt to the downside. For more clues, we turn to the lower timeframes.
4H chart:
There are stronger signs that the trend is reversing here, but it's not fully confirmed for now. Namely, we see an important trend change according to the GMMA indicator (see chart below).
The short-term group of moving averages is crossing above the long-term group. This is the first sign for a trend change according to the GMMA. However, instead of chasing the move higher, it is advised to wait for a pullback before entering.
On this chart, we can also see the same 1.6550 resistance that may be soon tested. A break above resistance will provide the confirmation that the downtrend since March has ended.
The optimism in Europe driven by the proposed recovery packages should be able to push EURAUD higher over the coming days. After the strong rally since March, it's time for AUD to consolidate and correct on profit-taking, if nothing else. A reversal in risk appetite would only accelerate such a move into a steeper AUD decline.
Remember that EURAUD is a function of EURUSD + AUDUSD. So, this cross pair can have sharp fluctuations in its exchange rate based on convergent or divergent moves in EURUSD and AUDUSD.
- Wait for the reversal to complete and an uptrend to emerge on the 4h timeframe based on the GMMA indicator.;
- Then look to buy retracements toward the blue group of GMMA lines.
- An alternative scenario: if EURAUD makes another attempt lower, you can look to buy on levels below the 1.6060 lows. In this case, toward the support trendline around 1.58-1.28. At the moment, however, this scenario seems unlikely.
Stop loss:
- The stop should be based on the entry pattern. Below the reversal signal and below the GMMA long-term group of moving averages;
- The stop can be trailed higher as the position moves into profit and the price progresses higher
Targets:
- Toward 1.70 - the area around the 55-day and 100-day moving averages (orange and blue on daily chart);
- Targets on smaller timeframes can also be determined, which can optimize the potential profits with this trade. For example, based on the GMMA or other trend indicators/patterns.
Trade signals from the past week
TOTAL: 0 pips in the past week
TOTAL: +2725 pips profit since October 1, 2018
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Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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