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Scalps Favor Selling Rallies in EURAUD Post Head and Shoulders Break

By , Currency Strategist
27 March 2014 21:34 GMT

Talking Points

  • EURAUD Breaks below weekly & monthly opening ranges- Bearish
  • Broader head and shoulders break shifts medium-term outlook lower
  • Event risk on tap from Europe and Australia heading into month end

EURAUD Daily Chart

Forex-Scalps-Favor-Selling-Rallies-in-EURAUD-Post-Head-and-Shoulders-Break-_body_Picture_2.png, Scalps Favor Selling Rallies in EURAUD Post Head and Shoulders Break

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • EURAUD breaks below March opening range low 1.5150- Bearish
  • Key support break at 1.4940/78 puts Head and Shoulders formation in play
  • Support objectives at 1.4829, 1.4690-1.4730, 1.4430/50, 1.4253
  • Bearish below 1.5030, 1.5150- Bullish Invalidation
  • Daily RSI hold at 60 & subsequent 40 break- Bearish
  • RSI signature at lowest level since March of 2013
  • Event Risk: German CPI & Eurozone Confidence data tomorrow and RBA Interest Rate Decision on Tuesday

EURAUD Scalp Chart

Forex-Scalps-Favor-Selling-Rallies-in-EURAUD-Post-Head-and-Shoulders-Break-_body_Picture_1.png, Scalps Favor Selling Rallies in EURAUD Post Head and Shoulders Break

Notes: The EURAUD has made an impressive move this week with the pair breaking below the March opening range defined by the 38.2% retracement of the November advance at 1.5150. A weekly opening range break below 1.5085 further supported our near-term bias with the immediate focus remaining on the short-side below this level.

Bottom line: The pair has now completed a 1.618% extension off the decline from the monthly high and although this may offer some interim support, we’ll look to sell rallies / breaks of support while below 1.5030 with only a breach above this week’s high challenging our broader outlook. Note that a larger head and shoulders formation on the daily chart is in play here with longer-term objectives eyed around 1.4250.

Stay nimble heading into Eurozone data tomorrow morning with the RBA interest rate decision early next week likely to fuel added volatility in the pair. Keep in mind that the close of the month and quarter is upon us with the April and weekly opening range likely to offer further guidance on our near-term scalp bias. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

* 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

Resistance Target 1

30min

1.4915

Soft Resistance / Pivot

Resistance Target 2

30min

1.4955

Soft Resistance / Pivot

Resistance Target 3

Daily / 30min

1.4978/84

23.6% Retracement / February Low

Bearish Invalidation

Daily / 30min

1.5010/30

61.8% & 100% Extension(s)

Break Target 1

30min

1.5085

Weekly ORL

Break Target 2

Daily / 30min

1.5148/55

61.8% Ext / 38.2% Retrace / 100DMA / March ORL

Break Target 3

Daily / 30min

1.5221

100% Ext / Weekly ORL

Support Target 1

Daily / 30min

1.4829/55

1.618% & 2.618% Ext(s)

Support Target 2

Daily / 30min

1.4798

December Low / Pivot

Support Target 3

30min

1.4774

200DMA

Bullish Invalidation

Daily / 30min

1.4690 – 1.4730

61.8% Retracement / 100% Ext

Break Target 1

Daily / 30min

1.4550

October High

Break Target 2

30min

1.4502

2.618% Extension

Break Target 3

Daily / 30min

1.4430/50

78.6% & 38.2% Retrace(s) / August Low

Break Target 4

Daily / 30min

1.4253

88.6% Retrace / H&S Objective

Average True Range

Daily (20)

136

Profit Targets 31-34pips

*ORH: Opening Range High

*ORL: Opening Range Low

Other Setups in Play:

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

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

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars on Monday through Thursday mornings next week on DailyFX Plus (Exclusive of Live Clients) at 12:30GMT (8:30ET)

Interested in learning about Fibonacci? Watch this Video

27 March 2014 21:34 GMT