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

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.

Struggling right now? We’ve got a guide designed to help you – Building Confidence in Trading.

EUR/AUD Daily Chart

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

EUR/AUD Hourly Chart

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.

Trader Resources

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

To receive Paul’s analysis directly via email, please SIGN UP HERE

You can follow Paul on Twitter at @PaulRobinsonFX