First up, my apologies. There's no sub-forum for a EUR/AUD (yes, I know, it's an odd cross-currency pair), so I decided to post my trade idea here instead. Feel free to post your ideas and comments on this trade on this thread.
Trade Idea: 12-05-16 03:52
One reason why I love trading the cross-currency pairs is because it gives me plenty of trading opportunities to choose from! If I have a short euro bias, I'm not forced to stick to just EUR/JPY - I can choose to go short on other euro pairs as long as a valid setup emerges!
Why am I bearish on the euro? Well, as I said in my last EUR/JPY trade, it's all about politics right now baby!
The big news in the market right now is that our buddies over at Greece can't just get along. Because the New Democracy, Syriza, and Socialist parties couldn't form a coalition government, the Greek government decided that they would be better off having another election in June.
This puts Greece in a rather dangerous situation, as the country won't be able to receive any bailout funds from the EU and IMF. Take note that Greece has no more moolah in its vaults and without aid, it will run out of money by July.
As expected, this has been taking its toll on the euro, which is why the shared currency has struggled against other major currencies.
This brings me to my trade setup on EUR/AUD.
The pair has been respecting a long-term rising trend line for quite some time now, but seeing as how the outlook for the euro is looking rather dim, I have a feeling that the trend line could break soon.
For now, I'm going to be patient and wait for a BREAK of the trend line before establishing my short position. I think if price breaks below the recent support level at 1.2785, we could see a smooth ride back down to the former area of interest around 1.2600.
Here's my master plan:
Sell stop order at 1.2760, stop loss at 1.2830, take profit at 1.2600.
I think this should give my trade ample breathing space should we see any choppy moves. Also, I think my profit target is well-placed, and if it gets hit, this trade will give me a sweet reward-to-risk ratio of just over 2:1. Lastly, I'll be risking 0.50% of my account on this trade.