Trade Recommendation: EUR/AUD

The Euro/Australian Dollar pair (EUR/AUD) lost its bullish momentum in February 2009 when it failed to take out resistance of 2.00. The failed breakout ignited a bear run that saw the market generate eight straight red candles and plunge to 1.60 support in November 2009. In nine months, the Euro lost 20% of its value against the Australian Dollar.

The downtrend continued in December 2009 when it broke below 1.60 support. The pair generated a series of lower highs and lower lows until it bottomed out at 1.16033 in August 2012. On that month, the market showed signs of life as it reclaimed 1.20 support. It used the support level to rally to as high as 1.6477 in August 2015. While bears repelled the advance, it appears that bulls are in a very good position to take out the resistance.

Technical analysis show that the Euro/Australian Dollar pair is currently taking out 1.60 resistance to trigger the large cup and handle reversal pattern on the monthly chart. The breakout comes after the pair created a higher low of 1.36256 in February 2017. Moreover, the pair is not yet in overbought territory in the daily, weekly, and monthly charts. This means that bulls have room to complete the reversal.

The strategy is to buy as close to 1.60 as possible. If the pair stays above this level, it will likely use the new support to move to our target of 2.00. The process may take more one year.

Monthly Chart of EUR/AUD on Forex.com

As of this writing, the Euro/Australian Dollar pair is trading at 1.60377 on Forex.com.

Summary of Strategy

Buy: As close to 1.60 as possible.

Target: 2.00

Stop:  1.57

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.