The EURAUD has bounced after approaching its 50 DMA as visible in this D1 chart. This currency pair has now formed a head-and-shoulders pattern which is a reversal pattern and indicates that the EURAUD is due for a larger correction which could lead to a breakdown of its 50 DMA and a bigger correction. We expect this currency pair to breakdown below the 1.4000 level.
MACD has dropped into bearish territory with both the histogram as well as the moving average trading below its centerline and we expect this scenario to remain intact while bearish pressures are expected to increase. RSI is trading in neutral territory.
We recommend a short position at 1.4535 which would be an add-on to our previous short position which we took on May 14th at 1.3085. We also recommend a stop buy order at 1.4650 in order to hedge our short positions and before adding new positions to this trade.
Traders wish to exit this currency trade at a loss are advised to place their stop loss order at 1.4650. We will not use a stop loss order and execute this trade as recommended. Place your take profit target at 1.4085.
Here are the reasons why we call the EURAUD currency pair lower
- The EURAUD currency pair has formed a head-and-shoulders formation which is a bearish chart pattern and point to a trend reversal
- MACD is trading in bearish territory with both its histogram as well as moving average below its centerline
- RSI is trading in neutral territory and is trending lower
- Profit taking after a minor bounce in order to realize trading profits
- New short positions by institutional swing traders
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