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EURAUD Risks Near-Term Reversal Heading Into H&S Target, Key Support

EURAUD Risks Near-Term Reversal Heading Into H&S Target, Key Support

2014-07-24 18:12:00
Michael Boutros, Strategist
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Talking Points

  • EURAUD vulnerable for correction higher heading into August
  • Building momentum divergence at key support
  • Updated targets & invalidation levels

EURAUD Daily Chart

EURAUD Risks Near-Term Reversal Heading Into H&S Target, Key Support

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • EURAUD Completing Head & Shoulders Objectives
  • Support at 1.4216, 1.4140/66- bullish invalidation
  • Resistance objectives 1.44, 1.4593, 1.4733/50
  • Daily RSI divergence, resistance trigger pending- bullish
  • Limited event risk ahead until July 30th

EURAUD 30min Chart

EURAUD Risks Near-Term Reversal Heading Into H&S Target, Key Support

Notes: The EURAUD has achieved two of three support objectives noted on the June 10th report and now looks for completion of the broader head & shoulders formation break seen in March. Although the pair continues to trade within the confines of a well-defined descending channel formation off the yearly high, building momentum divergence on daily & intra-day charts suggest this rebound off a long-dated 38.2% retracement at 1.4216 may materialize into a more significant correction.

We’ll remain cautiously constructive heading into the close of the month and while I wouldn’t put it passed the pair to dip into our final unfilled support objective at 1.4138/66 before reversing, we’ll broadly look to buy dips into this region. Bottom line: Look for favorable long entries over the next few days while above 1.4140/66 with a breach above 1.44 offering further conviction on a near-term reversal. A break / close below key support invalidates this particular setup with such a scenario putting the larger trend off the yearly high back into focus eyeing initial targets at the November low (1.4050).

Event risk is rather limited heading into the close of the month with Australian building permits & Eurozone confidence data out on July 30th. 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

Technical Relevance

Resistance Target 1

30min

1.4300

23.6% Retracement

Bearish Invalidation

30min

1.4354/58

38.2% & 61.8% Retrace(s) / June Low

Break Target 1

Daily / 30min

1.4400/03

July ORL / 50% Retracement

Break Target 2

30min

1.4445/50

Weekly ORH / 61.8% Retracement

Break Target 3

30min

1.4482

Soft Resistance / Pivot

Break Target 4

30min

1.4516

78.6% Retracement

Break Target 5

30min

1.4556/63

May Low / 88.6% Retracement

Break Target 6

Daily / 30min

1.4590- 1.4601

July ORH / 23.6% Retrace / 61.8% Ext

Support Target 1

30min

1.4260

Soft Support / Pivot

Support Target 2

Daily / 30min

1.4216

38.2% Retracement

Support Target 3

Daily / 30min

1.4166

1.618% Extension

Bullish Invalidation

Daily / 30min

1.4139

100% & 1.618% Extension(s)

Break Target 1

Daily

1.4049

November Low

Average True Range

Daily (20)

87

Profit Targets 21-23pips

*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

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