Happy New Year everybody!
Today I want to give you my short term analysis for eur/aud currency pair. From
now on, occasionally, I want to take separate Forex pairs and do forecasts and
analysis on them. Some of them might be long term, some short
term trades, some maybe covering only a few days’ period and predictions
for a day or maximum a week. If you have been reading my blog regularly you
must have found that I like crosses and eur/aud, as well as gbp/aud have been
covered in my posts (with lots of examples) quite a few times. Last year was
very good for these pairs as they have been in very big swings (both up and
down) that lasted for 2-4 months. It was pretty easy to trade the pairs for swing
and trend
traders and the securities simply change
trend at the peak or bottom and trended in the other direction with minor
retracements. How about this year? Let
us think together!
Euro was very much pressured
by these huge debts from mostly South European countries and a lot of
economists, finance analysts, investors, speculators and average traders
doubted whether the European Union will survive. So, we saw sharp moves in Euro
crosses. However, as in the end of July the head of ECB announced that the
Central Bank was planning to do anything it takes to save the Euro zone Euro
bounced off significantly and strengthened against most currencies. The move
continued till the end of the year and some believe it is going to continue
this year too (at least against Japanese
Yen and US dollar). This might be true. However, I do not think Euro will
be that strong against commodity
currencies. Why?
If you look at daily charts
of various Euro pairs (and possibly Pound) you will see that at the end of the
year Euro and Pound managed to make new highs against US dollar and Japanese
Yen. However, it failed to do this with Australian dollar. Look at eur/aud and
especially gbp/aud to see for yourself.
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My predictions about eur/aud moves in first quarter of
2013
On the 7th of
October eur/aud reached its’ peak and started ranging. Just before the end of
last year it tried to reach this peak (on the 27th of December), but
failed and reversed sharply. In my opinion it will continue going down till
some significant support
is reached. I believe Euro bears will target 1.2160 (the low of the range) that
was made on the 12th of November (2012). I am not sure whether a
downtrend will develop or not. My best guess is that range trading will
continue. BOA (Bank of Australia) indicated that they are not planning to make
any more rate cuts. This is bullish for aussie. However, they have not made any
hawkish statements about rate increases in the future either. That leads me to
think that the pair may continue in the range for the first quarter of 2013.
eur/aud range top and bottom
For the time being the top
of the range is 1.2830-1.2800 level. I think these levels will not be reached
soon. I might be wrong, but still it is my speculation.
The bottom of the range
stands at 1.2160-1.2100 level. With some volatility and bounces the pair has
good chances of revisiting this level again. Don’t expect it to get there in a
few days. The pair sits at support at the time of writing and there is a ‘noise
area’ ahead with some bumpy ride down (a few days down, a few days up). Look
how the pair was going up from the 13th of November to the 9th
of December. Pretty shaky ride, huh? Shaky it was. The same can be said about a
swing down that happened from the 7th of October till the 1st
of November (2012). This and the above mentioned moves are very similar. It
happens quite often. If you see a strong move up (in a range) you will see a
similar move down in a very similar fashion. Support and resistance levels of
these moves will also coincide. Action equals reaction and vice versa. Have
this in mind. If you study charts more carefully you will see a lot of moves
that look like mirror trades or inverted trades.
Possible eur/aud support and resistance levels
Look at the chart below to
find current possible support and resistance levels for the pair. Red lines
represent support and resistance areas. They maybe subjective as technical
analysis deals with the past and any significant fundamental piece of news
can change those technical
areas that were important in most recent past. The same can be said about ‘noise
areas’ - a level where currency pair stalls for some period of time.
How to day trade eur/aud
How can one take advantage
of this information? If one has very small capital it is quite logical to try
to day
trade eur/aud limiting risk on each position and trying to increase profits.
If we assume that we expect a swing downwards to continue we would be willing
to pick only those trades that are in the direction of the swing. The first
trade could have been made at the break of 1.2670 level. The pair formed a
reversal pattern at the top and when the pattern (123) was confirmed by
breaking the above mentioned level we knew that a real reversal took place and
the short term trend is now down.
Now, there are a few
possibilities to implement these trades. One is to wait for retracements that
often happen during Asian sessions and then place sell orders when the
retracement is over and moves in the direction of the trend continue. This
usually happens during European sessions. I see a lot of possibilities to trade
in the direction of a trend
during London session. As has been said, moves usually start during
European session, continue or stall during US session and prices usually
retrace during Asian session. In the morning, trends often resume. Not always,
but more often than not. So, if there is a retracement in eur/aud it is an
opportunity to enter a day
trade with some 30-50 pips stop loss and a take profit order somewhere near
the closest support. If you are planning to open a few positions you can exit
the first one at the closest support and another one at the next one. Of
course, you can have more than a few positions. You have to be sure where you
expect to exit each position though. You see my levels of support. Try to draw
some of your own and make your own decisions.
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If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!
http://www.etoro.com/A41516_TClick.aspx
Ok. I hope you benefited
from the post. If you liked the post I would also be happy if you gave a plus
on Google+, tweeted, liked it on Facebook and other social platforms. Have a
nice day.
Vytas.
Disclaimer
Trading
financial markets carries a high level of risk, and may not be suitable for all
investors. All information on the blog http://trend0.blogspot.com/ is of educational
nature and cannot be considered as advice, recommendation or signals to trade
in any financial markets.