EUR/AUD bullish reversal in play: 1:2 rr potential

• Buy EUR/AUD
• Entry price: 1.6560 – 1.6600 area
• Stop loss: 1.63
• Leverage: 3x
• Take profit 1: 1.69
• Take profit 2: 1.7150
• Timeframe: 2-3 weeks
• Risk-reward ratio: 1:2

EUR/AUD is one of the most volatile currency pairs on the FX dashboard. It is usually associated with risk-on/risk-off market movements, meaning that it rises in periods of uncertainty and declines when market sentiment is positive.

After dropping from 1.70 to 1.63 since the middle of August, EUR/AUD forms a bullish reversal pattern – an inversed head and shoulders. Its measured move is only the minimum distance the market should travel, and so I’m looking for a new marginal high while the price holds above 1.63.

Rising oil prices (i.e., energy prices) are negative for Europe and the common currency. Also, the ECB has been very vocal, stating that it had reached the terminal rate. Hence, the fundamentals do not bode well for the EUR.

However, EUR/AUD is a cross pair. It means it moves based on the differences between EUR/USD and AUDUSD. My take is that it will make a new marginal high on EUR/USD, outperforming AUD/USD.

• The risk-reward ratio is an attractive one, 1:2
• Look for the market to accelerate once above the neckline
• 1.70 should be a pivotal level
• A move below 1.63 would invalidate this scenario

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