Even though the Euro is racing, I will still hold my bear projection in this pair. The reason is simple. Higher time frame moves take precedence and in one way or another, lower time frame trends to follow suits after short term counter moves.
At the look of things, the same analogy applies to this pair. To begin with, our stochastics settings signal bearish pressure and already, there is a sell signal printed turning from deep the overbought territory. Additionally, last week’s bearish engulfing candlestick completed a double bear reversal move in the weekly chart complete with a bearish divergence pattern. In line with these confluences, it’s only safe to say that we shall retain our bearish skew and look for sell entries in the 4HR chart with last week’s highs acting as the upper limit of this move.
In the 4HR chart, stochastics are turning higher. This is normal and after all, we are in the second day of trading. When we paste a Fibonacci retracement tool between last week’s high lows then our sell zone pops out. So far, Euro bulls have recovered 25% of last week’s drop in prices but until a sell signal forms, we shall still remain on the sidelines. From this set up, our potential sell zone lines between the 50% and 61.8% Fibonacci retracement levels at 1.58 and 1.585. There about, if a stochastics sell prints or a strong bearish candlestick prints, then we shall sell and place our stops at the 78.6% Fibonacci level at 1.59.
This will be my EURAUD trading strategy:
Sell Limit: 1.58-1.585
Stop Loss: 1.59
Take Profit: 1.5250-Support in the weekly chart.
Let me know what you think guys.