Timeframe: D1 Recommendation: Short Position
Entry Level: Short Position @ 1.5000
Hedge Level: Stop Buy Order @ 1.5150 (Take Profit Level @ 1.5300)
Take Profit Zone: 1.4500 – 1.4550
Stop Loss Level: 1.5150 (We will not use a stop loss order and execute this trade as advised below)
The EURAUD has rallied after it broke out from its previous horizontal resistance zone as visible in this daily chart (D1). This currency pair has now formed a double top formation which is a reversal pattern and marked by red circles in the above chart. We expect the EURAUD to correct back down into its horizontal support zone which is marked in blue.
MACD has topped out and momentum should recede. We expect the histogram to start trading below its moving average. RSI is trading in extreme overbought territory and a breakdown should intensify the sell-off.
We recommend a short position at 1.5000. We also recommend a stop buy order at 1.5150 with a take profit target of 1.5300 in order to hedge our short position and before adding new short positions to this trade.
Traders who wish to exit this currency trade at a loss are advised to place their stop loss order at 1.5150. We will not use a stop loss order and execute this trade as recommended. Place your take profit order at 1.4500.
Here are the reasons why we call the EURAUD currency pair lower:
- The EURAUD currency pair has formed a double top formation which is a bearish chart pattern
- MACD indicates that momentum has topped out
- RSI is trading in extreme overbought territory and a breakdown should accelerate the correction
- Profit taking in order to realize trading profits which should fuel the correction
- New short positions by institutional swing traders
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.