CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

EUR/AUD traders eyeing a bounce or break from 200-day moving average

Article By: ,  Market Analyst
January 22, 2024 4:19 AM
  • EUR/AUD is trading near its 200DMA and uptrend support, providing decent risk-reward for traders depending on how the price evolves.
  • Upside momentum has been waning with the pair reversing hard late last week

The proximity of EUR/AUD to its 200-day moving average and uptrend support presents an opportunity for traders to position for either a bounce or break from this technical juncture, providing favourable risk-reward depending on which way the price moves.

EUR/AUD 200DMA provides a level to build a trade around

Having rallied earlier in the year on a stronger US dollar and higher US bond yields, a scenario the AUD typically struggles to combat more than EUR, the pair was rejected at downtrend resistance on Thursday last week following the release of Australia’s unusually weak December jobs report. The subsequent reversal has seen EUR/AUD retest its 200DMA, a level it has respected on most occasions dating back to early 2022.

The reversal, coinciding with RSI breaking its uptrend from the beginning of the year, suggests upside momentum is flagging. However, with intersection of the 200DMA and uptrend support holding firm, there’s no guarantee we’ll see a deeper pullback than that already seen. It may only be early days for the latest daily candle, but the early signs only act to underline that point.

On the upside, downtrend resistance is found around 1.6640, allowing those considering longs to place a stop below the 200DMA, providing a decent risk-reward setup. Alternatively, a break of the 200DMA may be even more appealing for those considering shorts with only the 50DMA standing in the way of a potential retest of 1.6290, a level that previously acted as resistance support over the past two months. A stop above the 200DMA would provide protection against a reversal.

As for fundamentals considerations, I detailed why the risk environment may remain favourable this week in an earlier post.

-- Written by David Scutt

Follow David on Twitter @scutty

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the market you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024