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EUR/AUD Key Reversal at Resistance, H&S Combo

EUR/AUD Key Reversal at Resistance, H&S Combo

2018-02-07 16:22:00
Paul Robinson, Strategist
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EUR/AUD Highlights:

  • Key reversal on daily time-frame at resistance
  • ‘Head-and-shoulders’ pattern on intra-day time-frame
  • Looking for a move to ~15500 near-term on neckline break

What is driving the Euro & Aussie this quarter? Find out in the Q1 Trading Forecasts.

EUR/AUD is in the process of putting in a second key reversal bar during the past two sessions, coming off a failed attempt to break above the December high. The key-reversals (aka – pin bars, shooting stars, etc.) at resistance alone are enough to turn the picture bearish, but there is also a pattern within those bars on the shorter-term time-frame creating a stronger for shorts.

Most easily visible on the hourly time-frame, a ‘head-and-shoulders’ pattern is near its trigger point. On a closing bar below 15634 both the neckline and lowest swing low over the past few days will have been broken. The measured move target (MMT) based on the height of the pattern points to a move to under 15500. This projected move aligns roughly with price support in the same vicinity.

If the neckline is broken, stops should be placed sufficiently above the neckline, 15700 should be far enough beyond this threshold to stay out of harm’s way. The distance from entry to stop and entry to target allow for sufficient risk/reward of ~1:2.

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EUR/AUD Daily Chart

euraud daily price chart with key reversal bar

Rejection bars at resistance setting the 'head-and-shoulders' pattern up.

EUR/AUD Hourly Chart

euraud 1-hr, head-and-shoulders pattern

The key to H&S patterns is waiting for the neckline to break; it's support until it's not.

*Another 'head-and-shoulders' pattern is in full swing as of yesterday, but on a much broader scale - AUD/NZD trade set-up from late last month.

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---Written by Paul Robinson, Market Analyst

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