Trade of the Week: Next Steps For EURAUD

Trade of the Week: Next Steps For EURAUD

Trade of the Week: EURAUD has moved aggressively higher over night following another rate cut by the RBA who trimmed their headline cash rate from 2% to 1.75%. The move was a clear response to last week’s disappointing inflation reading which showed inflation falling -0.2% QoQ in Q1 and printing well below expectations in the YoY measure also. AUD was already under pressure this week, following weak Chinese Manufacturing data, and this latest move by the RBA confirms a shift in sentiment for the currency which had thus far been trending higher over the year.

The Euro continues to forge higher ground, supported by a continued weakness in USD and a lack of direct targeting on behalf of the ECB who are focusing their efforts more on stimulating domestic demand rather than weakening the exchange rate. This dynamic should allow for further room to the upside in EURAUD over the course of the week.

Trade Idea: After putting in a double-bottom reversal at the 1.4450 level, price has been grinding steadily higher. The overnight move move in EURAUD has now seen price break above key resistance at the 1.7170-1.52 area, the neckline of the double bottom. If this area can hold as support I will be looking for price to turn higher once again and will play a break out above current highs. I will be monitoring price action and will update as the idea develops or is negated. If price does turn higher, I will initially be looking for a move into 1.54 resistance.

Stopped out – 80 pips