EUR/AUD Enters Support Area, Watching for Consolidation Then Breakout
Cory Mitchell, CMT
The EURAUD has neared support at 1.61. This is a minor support level, with major support located below at 1.6 to 1.59.
Despite it being a minor support level (the level is a pullback low, not a major/trend reversal low), if the price consolidates in this area, and then breaks out of that consolidation, it could be a short-term opportunity in either direction. The consolidation hasn't formed yet on the 4-hour or daily chart, but likely will.
A continued move lower has room to move until it hits the 1.6 region. 1.6 to 1.59 has been strong support since mid-2019.
On the flip, if the price breaks back to the upside out of the consolidation, I'm looking for an upside target just below 1.64.
In either case, a trailing stop loss could be used in conjunction with profit targets. The trailing stop helps lock in profit as the price moves favorably, in case things get choppy in this area.
As indicated, for the trade to set up, I want to see a visible consolidation on at least the 4-hour chart and ideally the daily chart near (not exactly at) this 1.61 support area. Then, a breakout of that consolidation needs to occur.
The Eurozone has a 0% interest rate, while the AUD has a 0.75% interest rate. Longs in the pair pay daily interest on the differential, while shorts will receive a daily interest payment.
Check out Using Stop Losses and Where to Place Them.
By Cory Mitchell, CMT. Join me on Twitter @corymitc.
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.