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EUR/USD, AUD/USD On The Move- Fresh Scalping Setups

By , Currency Strategist
17 November 2011 21:38 GMT

We have reassessed our scalps from Tuesday’s EUR/USD Scalp Report after the single currency moved through all our scalp levels including our extended break-targets at 1.3420. A fresh Fibonacci extension taken from more recent price action provides us with new targets as investors continue to fret about the debt crisis which continues to rage on in Europe. The euro scalp is complimented by the Australian dollar which continues to hold a strong correlation with overall risk trends. The medium-term outlook on both pairs continue to favor further downside moves with the aussie breaking below key daily Fibonacci support at 1.0090 and the euro continuing to eye our bottom limit at the 1.34-figure. That said, we must acknowledge the possibility of a pullback of some magnitude after the substantial sell-off seen since the start of the week.

EUR/USD Scalp Setup

EURUSD_AUDUSD_On_The_Move-_Fresh_Scalping_Setups_body_Picture_2.png, EUR/USD, AUD/USD On The Move- Fresh Scalping Setups

The EUR/USD continues to consolidate into the apex of a wedge formation with price action holding between the 76.4% and 100% Fibonacci extension taken from the November 8th and 13th crests. We favor a downside break of this formation with a break below trendline support eyeing profit targets at the 100% Extension at 1.3435 backed by the 1.34-figure and the bottom limit at 1.3375. A break here risks substantial losses for single currency with subsequent break-targets seen at 1.3350 and the 1.33-handle.

Interim resistance is seen at the convergence of trendline resistance and the 76.4% extension at 1.3523 followed by 1.3550 and the 61.8% extension at 1.3577. A breach here negates our bias with such a scenario eyeing topside break targets at the 50% extension at 1.3620 and the 38.2% extension at 1.3660.A 30min average true range of 31.18 yields profit targets of 24-27pips depending on entry. Should ATR pull back dramatically, adjust profit targets as needed to ensure more feasible scalps.

*Note that the scalp will not be active until a break below trendline support or a rebound off 1.3520 or subsequent resistance level with RSI conviction. We will remain flexible with our bias with a move passed the topside limit at the 1.3577 eyeing topside targets.

Key Thresholds

Entry/Exit Targets

Timeframe

Level

Significance

Resistance 1 Target

30min

1.3523

76.4% Fibonacci Ext

Resistance 2 Target

30min

1.3550

Soft Resistance

Topside Limit

30min

1.3577

61.8% Fibonacci Ext

Topside Limit Break-Target

30min

1.3620

50% Fibonacci Ext

Topside Limit Extended Break-Target

30min

1.3660

38.2% Fibonacci Ext

Support 1 Target

30min

1.3435

100% Fibonacci Ext

Support 2 Target

30min

1.3400

Basic Support

Bottom Limit

30min

1.3375

Soft Support

Bottom Limit Break-Target

30min

1.3350

Soft Support

Bottom Limit Extended Break-Target

30min

1.3305

Basic Support

Average True Range

30min

31.18

Profit Target 24-27 pips

Upcoming Events

Event risk on the pair comes in to play tomorrow morning with October German producer prices on tap. Consensus estimates call for the pace of price growth to ease to 5.3% y/y from 5.5% y/y. The data is not likely to fuel much volatility as markets remain focused on developments out of Europe.

Date

GMT

Importance

Release

Expected

Prior

11/16

7:00

MEDIUM

German Producer Prices (MoM) (OCT)

0.1%

0.3%

11/16

7:00

MEDIUM

German Producer Prices (YoY) (OCT)

5.3%

5.5%

AUD/USD Scalp Setup

EURUSD_AUDUSD_On_The_Move-_Fresh_Scalping_Setups_body_Picture_3.png, EUR/USD, AUD/USD On The Move- Fresh Scalping Setups

The Australian dollar has continued to hold within the confines of a descending channel formation dating back to the start of the week as markets continued to turn on higher yielding risk assets. An embedded wedge formation gave way in New York with a break below the 1.0040 level before encountering interim support at 0.9980. A break here eyeing subsequent profit targets at the 100% Fibonacci extension taken from the November 3rd and 13th crests at 0.9950, 0.9910, and 0.9880. Extended break-targets are held at 0.9840 and the 0.98-figure.

Topside resistance is eyed at 1.0020 with subsequent ceilings seen at the 76.4% extension at 1.0040, 1.0065, and the 61.8% extension at the 1.01-figure. A breach above this level negates our bias with such a scenario eyeing topside targets at 1.0145 and the 38.2% extension at 1.0190. A 30min average true range of 27.47 yields profit targets of 21-25pips depending on entry. Should ATR pull back dramatically, adjust profit targets as needed to ensure more feasible scalps.

*Note that short-scalps will not be active until a break below 0.9980 or a rebound off 1.0020 or subsequent resistance level with RSI conviction. We will remain flexible with our bias with a move passed our topside limit at 1.01 eyeing topside targets.

Key Thresholds

Entry/Exit Targets

Timeframe

Level

Significance

Resistance 1 Target

30min

1.0020

Soft Resistance

Resistance 2 Target

30min

1.0040

76.4% Fibonacci Ext

Resistance 3 Target

30min

1.0065

Soft Resistance

Topside Limit

30min

1.0100

61.8% Fibonacci Ext

Topside Limit Break-Target

30min

1.0145

50% Fibonacci Ext

Topside Limit Extended Break- Target

30min

1.0190

38.2% Fibonacci Ext

Support 1 Target

30min

0.9980

Basic Support

Support 2 Target

30min

0.9950

100% Fibonacci Ext

Support 3 Target

30min

0.9910

Soft Support

Bottom Limit

30min

0.9880

Basic Support

Bottom Limit Break-Target

30min

0.9840

Soft Support

Bottom Limit Extended Break- Target

30min

0.9800

Basic Support

Average True Range

30min

27.47

Profit Targets 21-25pips

---Written by Michael Boutros, Currency Analyst with DailyFX.com

To contact Michael email mboutros@dailyfx.com or follow him on Twitter @MBForex for updates on this scalp and other trades.

To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@dailyfx.com

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17 November 2011 21:38 GMT