Trading opportunities on the currency pair: The euro has been provided with support by Draghi’s and Yellen’s speeches. In this idea, we’re looking at a breakout of the 1-1 channel at 1.5070 with subsequent growth to 1.5250. It’s worth betting on a rise should the price get a foothold above 1.5070. If the price exits the 3-3 channel downwards and trader sentiment switches from bullish to bearish, this scenario will not play out.
Background:
The previous idea on this currency pair was published on the 29th of May this year, when the Aussie dollar was trading at 1.5010. Bearish signals had formed on the daily and weekly timeframes, so I was expecting a downwards correction. I forecasted correctional movement towards the TR4 trend line at 1.4450 (I picked the wrong minimum value in this review). 1.4690 provided an intermediate target. The daily pin bar formation stopped after the third day. The correction started from the upper boundary of the 1-1 channel at 1.5227. During the first downwards wave, the price reached 1.4690, and hit 1.4450 on the second. I think that my idea didn’t work out due to the price divergence at the top.
Fig 1. Weekly chart.
The original TR4 trend line was broken through at 1.4577. After the price restored to above 1.4600, this line corrected to 1.4418. The single currency closed up against the Australian dollar last week. The highest growth on the pair was seen on Friday, the 25th of August. The euro rose across the market after speeches at Jackson Hole from Fed head Janet Yellen and the ECB’s Mario Draghi. Draghi didn’t say anything about current monetary policy. The euro’s growth before trading closed may be down to the fact that Draghi was silent on that very subject. Market participants took it to mean that the current exchange rate was not a problem for the European regulator.
The euro rate has returned to the upper boundary of the 1-1 channel. So long as optimism is the prevailing sentiment on the market regarding the euro since Draghi’s speech, and the bullish phase continues through the 1st of September this year, there is every chance the 1.5070 resistance will have its strength tested. If the price exits the 1-1 channel upwards and this growth gathers pace, we can expect the euro to rise to 1.5250. If buyers continue to strengthen their positions, there will be a high chance of the rise continuing as far as 1.5515.
Fig 2. Daily chart.
There are more detailed markings on the daily chart. The price is trading within the upwards 3-3 channel. If buyers are active this week and manage to get a foothold above 1.5070, we could see the price reach 1.5250.
If buyers fix the price above 1.5070, it’ll be worthwhile opening some long positions. If the price exits the 3-3 channel downwards, and the sentiment among traders changes from bullish to bearish, this scenario will not play out.
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