Juice Left In EUR/AUD Collapse?

Last updated 1/4/2010 3:46 PM EST (GMT -5) 1 Comments

FX360 Technical Analyst Staff

Technical Analyst, GFT

Having seen 500+ pip collapse over the past two weeks, the EUR/AUD has now entered waters uncharted since late 2007 when rates reached and all-time low near 1.55. Rates are currently trading near 1.58 very near converging fib support on the daily based on an emerging bullish butterfly pattern. This may hint towards a small near-term recovery with a relatively quick rally perhaps covering the rather significant bearish gap we saw this weekend. However, based on the characteristics of these types of geomteric patterns, this bearish gap suggests an ABCD continuation move may be in progress where we look to an extension of the AB=CD pattern. In this case, we see that the 127.2% ABCD extension (where CD equals 127.2% of AB) comes right around that same 1.55 major support as well as 161.8% of XA, which gives us another valid bullish butterfly pattern. At the moment, the best setup is a EUR/AUD buy down near 1.5550-1.55, which probably wont come into play for a few days. However, if prices do begin to rally this week we'll keep an eye out for bearish pattern to emerge and ideally complete at initial resistance near 1.5950-1.60 (gap) followed by 1.61 and 1.62--all of which represent fib retracements based on the current drop from point C. Should this occur, we would of course look to take profits down near 1.55, and potentially reverse positions, but more on that as price action unfolds.

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Comments (1)

Big Weir

January 05, 2010 at 06:14 PM ET

Nice Post, I like the Fib ratio's alot on this one, D at 161.8 of XA, 224.0 of BC and 127 ABCD all around the 15500 with some good support. I will be watching this on closely for a trade opportunatey

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