EUR/AUD trades in a sideways pattern
EURAUD put in a lower close on Friday, making it the fourth day of such lower closes since it bounced off its range top early last week and subsequently sold off. It is now trading in a sideways pattern.
In 2004, EURAUD topped out around 1.7800/33(weekly chart) levels and declined sharply to a low of 1.5534 in Jun’05 with a minor retracement.A six-month consolidation followed until a breakout to the upside occurred in early Jan’06 taking the cross to as high as 1.7362 in Jun’06.With a failed retest, EURAUD pushed hard to the downside trading in a range and forming a rectangle pattern. This is a series of sideways price fluctuations bounded on both top and bottom by horizontal lines.
Figure 1: Daily Chart
Figure 2: Weekly Chart
As can be seen on the daily chart, EURAUD is bounded by a horizontal line on the upside at 1.6923 and on the downside at 1.6587.The pair has been trading in this sideways range for the past two months and the development on the chart has not shown any evidence of a breakout either way very soon.
Technically, this is a consolidation pattern and can break either way making it a neutral pattern. There are two implications of this development. The first implication is a break to the upside, which will give us a price objective of about1.7259, established by projecting the width of the pattern from the breakout point. The second is a break to the down side, which gives us a price target of about 1.6251.
Figure 3: EURUSD
So where is the cross headed now? In the short term, it looks likely to see lower level prices towards the bottom of the range at 1.6587 based on its last week’s price action, which has pushed the daily momentum indicators lower. In addition, the weekly and monthly momentum indicators are in negative modes and are pushing lower suggesting that lower prices are expected. A break below its range bottom at 1.6587 should push the cross lower towards its April’06 low at 1.6369 ahead of its rectangle pattern price objective at 1.6251 and its Jan’06 low at 1.6163.On the whole, EURAUD is stuck in a range and based on its longer timeframe charts indicators, it should break to the downside. A break to the upside voids this view and supports the neutrality of this pattern
Happy Trading
Mohammed Isah
is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at www.tradingmarkets.com/fxtechnicalresearch.
He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at:
isahmo@gmail.com