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EURAUD Breakout Seeks Validation- Scalps Eye 1.4340 Resistance

By , Currency Strategist
23 October 2013 19:20 GMT

Talking Points

  • Trendline break looks for validation with breach above Fibonacci resistance
  • AUDUSD price action signals risk of correction- Constructive for EUR/AUD
  • Bias bullish above 1.4140 – Long conviction above 1.4340

EURAUD Daily Chart

Forex_EURAUD_Breakout_Seeks_Validation-_Scalps_Eye_1.4340_Resistance_body_EURAUD_DAILY.png, EURAUD Breakout Seeks Validation- Scalps Eye 1.4340 Resistance

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • EURAUD breaches trendline resistance off August high- 1.4340 breach to validate
  • Topside breach eyes resistance targets at 1.4469 and 1.4560/75
  • Interim support 1.4220/40- 1.4140 Bullish invalidation
  • Daily RSI long trigger pending at 50 (note trigger break earlier)
  • Key Events Ahead: Eurozone Manufacturing, Services & Composite PMI Thursday

EURAUD Scalp Chart

Forex_EURAUD_Breakout_Seeks_Validation-_Scalps_Eye_1.4340_Resistance_body_EURAUD_SCALP.png, EURAUD Breakout Seeks Validation- Scalps Eye 1.4340 Resistance

Notes: Similar to the EURNZD setup noted in yesterday’s report, but not with quit as much conviction. A bullish weekly opening-range break and subsequent breach above confluence resistance (1.4226-1.4238) warranted long exposure after seven consecutive daily attempts at breaking below the 1.4122/40 support structure failed. The rally encountered Fibonacci resistance at 1.4336/40, a region that has served as a clear pivot dating back to early September. Momentum seems uninspiring in the near-term with pullbacks likely to offer favorable long entries and clearer topside triggers. A breach above the highs puts the larger channel-break back on track with such a scenario eying objectives at 1.4390 and 1.4465.

Slight bullish divergence on the daily chart has been identified and we’ll continue to target topside scalps. Only a break and close below 1.42 invalidates our scalp bias while a move below 1.4140 would negate our broader directional bias; such a scenario targets key longer-term Fibonacci support at 1.4041 and the 38.2% retracement of the 2013 range at 1.3955.

Note that near-term price action suggests that the AUSDUSD may be ready to correct lower as well after pressing into 4-month highs before breaking below the weekly range low. As such we will be cautiously watching price action develop for further evidence that an interim high may be in place.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

Entry/Exit Targets

Timeframe

Level

Significance

Bearish Invalidation

Daily / 30min

1.4336/40

50% & 23.6% Retracements

Break Target 1

30min

1.4380/92

10/13 Weekly High / 61.8% Retrace

Break Target 2

30min

1.4430

Soft Resistance / Pivot

Break Target 3

Daily / 30min

1.4465/70

38.2% & 78.6% Retracements

Break Target 4

30min

1.45

Psychological Figure / Pivot

Break Target 5

Daily / 30min

1.4560/75

Late Sept High / 50% Retracement

Support Target 1

30min

1.4290

38.2% Retracement

Support Target 2

30min

1.4225/37

23.6% Retrace / 38.2% Extension

Support Target 3

30min

1.4175

Soft Support / Pivot

Bullish Invalidation

Daily / 30min

1.4122/40

October Low / 50% Fib Extension

Break Target 1

30min

1.4080

Soft Support / Pivot

Break Target 2

Daily / 30min

1.4042

61.8% Fib Ext

Average True Range

Daily

121

Profit Targets 28-30pips

Other Setups in Play:

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---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

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23 October 2013 19:20 GMT