EURAUD is a pair that hasn’t offers much in the way of favorable price action in recent months. The choppy movement that has persisted since late last year combined with the increased volatility of late has made for an unfavorable trading environment.
However, there is one level that continues to stick out like a sore thumb, begging to be traded under the right circumstances. And thanks to one of our long-time members for bringing a particular pattern to our attention, we just might see the “right circumstances” develop over the coming sessions.
As can be seen from the 4-hour chart below, EURAUD appears to be struggling to make fresh highs. In doing so, it has put further pressure on the 1.5340 handle, a level that can be traced as far back as 2000 when it held as support for several weeks.
To add to the confluence factor, a look back to December of 2015 shows a trend line that intersects perfectly with 1.5340, the neckline of the (potential) head and shoulders pattern that has been forming since the second week of the new year.
Under normal conditions, a retest of confluent support would signal a potential buying opportunity. However, due to the reversal pattern that is unfolding above the key level, a better approach may be to wait for a sell signal on a close below the neckline.
Only time will tell, but a close below 1.5340 would first expose the 1.50 handle followed by the measured objective at 1.4600.
