EURAUD Rising Wedge

Timeframe: D1                                                                                      Recommendation: Short Position
Entry Level: Short Position @ 1.5125
Hedge Level: Stop Buy Order @ 1.5300 (Take Profit Level @ 1.5500)
Take Profit Zone: 1.4500 – 1.4550
Stop Loss Level: 1.5300 (We will not use a stop loss order and execute this trade as advised below)
The EURAUD has rallied strongly as visible in this daily chart (D1). This currency pair has now formed a rising wedge formation which is marked by dark red lines in the above chart. The rising wedge was formed after the EURAUD broke out from its resistance zone. We expect the EURAUD to correct back down into its horizontal support zone which is marked in dark blue.
MACD has indicated strong momentum, but we expect the histogram to drop below its moving average during the expected correction. RSI is trading in extreme overbought territory and a breakdown should initiate the sell-off.
We recommend a short position at 1.5125 with a potential second entry level at 1.5500. We also recommend a stop buy order at 1.5300 with a take profit target of 1.5500 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 1.5300. We will not use a stop loss order and execute this trade as recommended. Place your take profit order at 1.4525.
Here are the reasons why we call the EURAUD currency pair lower:

• The EURAUD currency pair has formed a rising wedge formation which is a bearish chart pattern
• MACD indicates strong momentum, but we expected the histogram to drop below its moving average
• RSI is trading in extreme overbought territory and a breakdown should fuel the correction
• Profit taking in order to realize trading profits which should add to bearish pressures
• New short positions by institutional swing traders

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