A double top chart pattern has formed on EUR/AUD’s daily time frame and it appears the pair is revving up for a reversal from its recent climb. The neckline around the 1.4500 handle seems to be broken already and the selloff is underway.
Stochastic is also pointing down, hinting that sellers are in control at the moment. For now though, the pair is stalling at the former resistance level within the 1.4300 to 1.4400 zone.
The ECB rate decision is scheduled today and a downbeat statement could keep this pair selling off. Earlier today, Australia’s trade balance came in weaker than expected but it didn’t seem to derail the AUD’s rally. It appears that the improvement in Chinese PMI earlier this week is keeping the commodity currency afloat.
Shorting at market and aiming for 400 pips, which is the same as the chart pattern’s height, could yield a reward-to-risk ratio of 2:1 with a wide 200-pip stop.
By Kate Curtis from Trader’s Way