I haven’t commented on the EURAUD for quite some time. It isn’t a cross I usually trade, and toward the end of last year, the price action had become far too choppy for my liking.
However, the past 48 hours of activity have caught my attention. On Friday, buyers managed to close the week above the 1.4090 handle. This level has been a key factor for the Euro cross since November of last year.
The level is also the 50% retracement when measuring from the 2012 low at 1.1605 to the 2015 high near 1.6590.
But a failure to find a bid at this level during yesterday’s retest has raised concern over the validity of Friday’s breakout. On top of that, yesterday’s move carved out a bearish engulfing day.
There is a chance the key level is a bit lower than 1.4090 based on some of the lower wicks from November and January. As such, I want to see how the pair responds to a retest of the area as resistance before considering an entry.
If we move down to the 4-hour time frame, we can see what triggered the recent decline. It appears we have an ascending channel developing off the current 2017 low. The resistance level that capped yesterday’s advance extends from the February 17th high.
From here any retest of 1.4090 will likely encounter selling pressure. There is some support at 1.4050, but a close below that would expose channel support near 1.3900.
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