The aggressive
short-term trading strategy explained in my last article was recently applied to
the EURO AUD last week when the Euro experienced significant losses against
other major currencies. The lukewarm response to the Spanish bond auction
renewed fears about the economic outlook for Europe
and its common currency, leading to declines against the USD, Aussie, Pound and
Canadian Dollar.
More trades such
as this are likely in the weeks ahead as the Euro loses more strength
against the majors. Although we might actually see a brief rally this week as
the pairs retrace in favour of the Euro, this is likely to be temporary ahead
of further declines towards the end of April.
On April 5th, the 4H Chart
had formed a Descending Pennant at a major downtrend line and broke an Inner
Uptrend Line to signal a strong possibility of a pullback. The other reasons to
have expected a decline were that
the pair was at the end of its average Weekly Range of 500 pips
it was also just below the Support of the Weekly
Chart’s Range which normally leads to a pullback
the Euro had already started to decline
significantly against other pairs earlier in the week.
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