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Thomas Long, Course Instructor

The 4-hour chart shows a bounce off of a 13-year low which offers the opportunity to sell this pair.

euraud 041910

We can look at this in a number of different ways but sometimes the use of support and resistance just makes the most sense. We can see the buy side high of this move up presently set at the 1.4723 level. A move up through that high would indicate additional strength which means that this would be a good place to exit any open sell trades. A solid entry could be on the move down through the 1.4497 low, which would mean a risk of 226 pips. More aggressive traders might just open a new sell position now, which would mean a risk of closer to 100 pips but a lower chance of success on the trade. It is a trade off and the method chosen really does depend on the risk tolerance and preference of each trader. Those traders who prefer to sell on the move down through support should look for twice their risk in profit potential for a 1:2 risk:reward ratio. Traders who sell now should look for three times that risk to make up for a lower win percentage while taking advantage of the chance for being in on a bigger part of a potential trending move down to new lows.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.