Two weeks ago, July 6th to be exact, I mentioned the bull flag pattern that had been forming on EURAUD since early June. The commentary was put out shortly after the pair had confirmed the pattern with a break higher.
That trade setup went on to generate a gain of 250 pips for those who caught it. The resistance level in focus from that commentary was trend line resistance from January of 2014. Sure enough, the market rallied 50 pips above the level intraday before being overtaken by selling pressure and eventually selling off to the tune of 415 pips over the next couple weeks.
Fast forward two weeks later and the pair appears to have just broken free from another bullish pattern. Similar in nature to the flag pattern that we saw last month is the bull pennant, a pattern that has been forming since trend line resistance came into play on July 10th.
From here the 1.4768 area is likely to act as resistance and of course the 1.50 area is likely to attract sellers just as it did earlier this month. However if we use a measured objective for the pennant pattern we get a target of 1.5300, which oddly enough is also a very prominent 2014 high.
This leaves traders with a few possibilities in terms of where to take profit. The 1.50 level is likely to act as strong resistance, however a break there could squeeze any sellers and trigger a move to 1.5300 in short order. As always, the final decision is yours.
Summary: Watch for buying opportunities above 1.4675. More conservative traders can wait for a close above 1.4768 before looking for a buying opportunity. Key resistance comes in at 1.4860, 1.5000 and 1.5300. Alternatively, a 4 hour close below 1.4650 would negate the bullish bias.