The Daily Trade – Day 53

Filed under: Learn Forex Trading |

Trade Number 53 – EUR/AUD 4-Hour Chart

Today’s daily trade features a forex pair that is often overlooked, as it is not one of the better-known trading pairs. It is the EUR/AUD pair. Let’s begin as always by looking at the daily chart so that we can see the relevant areas of support and resistance.

 

Figure 1.

Figure 1 shows the daily chart for the EUR/AUD pair. I have drawn in several areas of support and resistance, but the one we are interested in is in the middle of the chart where price is approaching. This area of support/resistance was first formed in May of this year as resistance. It took around ten attempts before price finally broke through this level. There was then a change of polarity and it held well as support in mid-June before breaking through it again.

 

There was another nice pin bar that pierced through this zone again in early September, so I have been on the lookout for any price action signals at this zone since then on the daily, 1-hour, and 4-hour charts.

 

Figure 2.

Price recently approached this area again, and if you look at Figure 2, you will see that a nice bearish engulfing pattern emerged on the 4-hour chart. This pattern was just above our zone – so you might be forgiven for think that price had already broken through this area of resistance. However, the key piece of information in this puzzle is that price had not closed above this area on the daily chart.

 

If you had taken a short trade after the close of the bearish engulfing candle with a tight stop loss just above the high of the move and a risk reward of 1:2, then you would have made a tidy little profit and a 2% rise on your bank (see Figure 3). That’s it for now – more tomorrow.

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