EUR/AUD Corrective Wave: Currency Trading Forex Guide – May 7, 2014

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EUR/AUD Corrective Wave: Currency Trading Forex Guide - May 7, 2014

EUR/AUD Corrective Wave: Currency Trading Forex Guide - May 7, 2014

EUR/AUD may be done with its corrective wave and ready to resume the selloff, as the downtrend on the 4-hour chart remains intact. Recall that EUR/AUD recently formed a head and shoulders currency trading forex pattern on the same time frame, an early indication that further losses are in the cards.

The pattern’s neckline is located at the 1.5000 major psychological level and the pair has since broken down to a low of 1.4650. In the past few weeks though, the pair retreated back to the 1.5000 major psychological handle, which is holding as resistance for now.

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EUR/AUD Currency Trading Forex Forecast

A closer look at the recent test of the 1.5000 major psychological resistance and broken head and shoulders currency forex trading neckline shows that a shorter-term double top formation was created. This is another signal that a selloff is likely to follow.

The pair has yet to break below the 1.4900 major psychological support and double top currency forex trading neckline before confirming the dive back to the previous lows at 1.4650. The 38.2% Fibonacci retracement level coincides with the 1.5000 resistance and may hold as the ceiling in case price still spikes higher during this week’s top-tier euro zone events.

Bear in mind that the ECB is set to announce its monetary policy decision in tomorrow’s London trading session and Governor Draghi will hold the press conference sometime during the start of the New York currency forex trading session. This might lead to additional volatility for the euro and actual monetary policy easing could drive the shared currency lower against its forex counterparts.

Deflation has been a persistent concern in the euro region and policymakers are wary that euro strength could worsen the situation. ECB officials could attempt to jawbone the currency in an effort to engineer weakness or announce negative deposit rates to spark economic activity in the euro zone.

To contact the reporter of the story: Marco Roemer at marco@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.