An upcoming sell setup on EURAUD.
Forex Analysis #8
A breakout pullback SELL setup in EURAUD
Hey there, TraderSaan is here.
Today I am going to share a upcoming SELL setup in AUDUSD. I will go through the step by step process like entry, exit, stop loss and reason behind taking this trade.
The strategy I am going to use is called BREAKOUT PULLBACK strategy. If you don't know about the strategy, please pay a visit to the link below.
I am actually a swing trader, meaning I hold my position for 2-3 days or more. So I usually trade at the timframe of 4 hour (H4), 1 hour(H1), or occasionally at 30 miniutes (M30). And one more thing is that I analyze the chart in tradingview and take trade in MT4 (for FOREX) and Binance ( for CRYPTO).
First I will cover the fundamental part and then will give an insight in the technical chart of EURAUD
Fundamental Outlook: Bearish
EUR
There are many strong reasons for which the EUR is fundamentally bearish. Let's see:
The economy of EU depends on the economy of the member country, and specially the economy of France. Currently France is going through the presidential election. That's why EUR is facing a geopolitical issue.
For the EUR, COVID new variant is also a confluence for being weak as EUR is a risk on currency.
Russia is currently attacking Ukraine in the neighbourhood zoon of EU which is a cause of less business deal for EU.
ECB has made a rate hike last month, but the inflation is too high compared to that rate hike, For that reason many members want normalisation in the monetary policy.
AUD
• The commodity market is booming after the Russia-Ukraine war as the major supplier (Russia) has been banned by the sanctions of NATO and Joe Biden.
• The Australian economy is recovering its post COVID damge. So they are about to rate hike.
That's why I am bullish on AUD.
Technical Analysis
- The price has already broken the support zone and made a healthy pullback. And price is in downtrend, i.e., price is making lower lows, lower highs, and is breaking support again and again. And my perception is that market will make the broken the support zone to a resistance zone and will continue to go lower in the shown direction in the chart below.
EURAUD,H4, support brakout and pullback happend
Image source: tradingview, prepared by me
- To take a gauge of the pullback move, I use fibonacci retracements tool to see the psychological levels. Price is currently at the fib golden zone, i.e., in the zone between 50&61% ratio. This means a healthy pullback move has occurred. And this is possibly my entry zone of SELL order. It is shown by a golden elllipse in the chart below.
EURAUD, H4, Price is at Fib golden zone
Image source: tradingview, prepared by me
- For indicator confirmation, I usually use 20,50,100 and 200 MA. Here I have used 50 and 200 MA to see the momentum. Here in the chart below, 50 and 200 MA are aligned downwardly which indicates the sellers are in control in this pair EURAUD.
EURAUD, H4, 50&200 MA are aligned downwardly
Image source: tradingview, prepared by me
- Now that we have made our mind to SHORT the EURAUD, now we are going to fix our Entry, Stop Loss and Target Profit
Entry price is at 1.45716, which is the fib golden zone and it's on the broken support zone.
Stop Loss is at 1.46438, i.e., only 72 pips above the entry price, just above the broken support zone.
Target Profit is at 1.36759, that is 895 pips below the entry price, which is a support zone of bigger timeframe.
The Risk to Reward ratio is 1:12 which is pretty good.
EURAUD, H4, ENTRY, SL, TP
Image source: tradingview, prepared by me
This completes the setup of EURAUD
I always take a trade when my fundamental and technical analysis say the same thing. As follows:
Case I
Fundamental = buy, Tchnical = sell, that implies Not To Trade
Case II
Fundamental =sell, Technical = buy, that implies Not To Trade
Case III
Fundamental = buy, Technical = buy, that implies Jump In For Buying
Case IV
Fundamental = sell, Technical = sell, that implies Jump In For Selling
Disclaimer: This is not any financial advise or trading mantra. My purpose is to help traders to learn. This post is made for completely educational purpose. Hope it helps.
Thank you very much if you make it to the end. Happy trade.