In the medium term, the trend remains extremely bearish while 200 MAs and the downtrend trendline is being rejected.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
Key support levels: 1.6540, 1.6200
Key resistance levels: 1.6740, 1.6925
Price Action: After reaching the 1.9800 high on March 19, EUR/AUD has initiated a sharp downside correction. Since reaching the top, the pair already lost more than 15%, and this is within less than two months. The long term correction is still ongoing and EUR/AUD could be aiming for the long term uptrend trendline.
If we look at the average price downtrend trendline, recently pair rejected the trendline and produced a new lower low, hitting 1.6534 level. The correction up followed, which we used to apply the Fibonacci indicator. It shows that the potential downside target could be near the 1.6200 psychological support level. It corresponds with two Fibs, both of which applied to the recent corrective waves up, the major wave, and the minor wave.
On the recent corrective move up, price bounced off the 200 Exponential Moving Average and then broke below the uptrend trendline, suggesting further price weakness.
Potential Trade Idea: the area between 1.6710 – 1.6775 corresponds to the point of the uptrend trendline break. This area will most likely be defended by the bears, providing a long term selling opportunity.
Stop-loss: The exit signal for this setup, could be a daily break and close above 1.6773, alternatively, the hard stop loss could be placed at 1.6870
Take profit: The downside target level could be at 1.6200 which is a strong psychological and technical support, confirmed by 261.8% Fibs.