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EURAUD Currency Analysis

The EURAUD currency pair has traded pretty much as laid out in the October report. Now this big play opportunity looks set to bear fruit. Let's check it out beginning with the daily chart.


EURAUD Daily Chart

EURAUD Daily Chart
Larger Image

The Bollinger Bands show price making a marginal new high above the September high. A false break high. This high traded well outside the upper band which is consistent with high points.

Price then headed directly to the lower band and seems to be hugging it now. If the trend were up then price could have been expected to bounce right off the lower band. It didn't.

This move down has broken below the previous swing low so we have a lower low in place or still forming. All we need now is a lower high and then it is game on for the bears. And perhaps this lower high will be around the middle Bollinger Band. Let's see.

The lower indicators are looking bearish. The Relative Strength Indicator (RSI) and Stochastic indicator are both trending down and making new lows while the Moving Average Convergence Divergence (MACD) indicator is also trending down with the red line above the blue line signifying lower prices are likely going forward.

Let's now get a grip on the bigger picture starting with the monthly chart.


EURAUD Monthly Chart

EURAUD Monthly Chart
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The RSI is looking weak while the MACD has a bearish bias with the red line above the blue line. So the lower indicators don't appear to offer any hope to the bulls.

The Bollinger Bands show price seemingly getting rejected at the middle band. Price should reveal its hand this month by either cracking above the middle band or heading back and hugging the lower band as the downtrend gathers momentum.

The Parabolic Stop and Reverse (PSAR) indicator, which pertains to the dots, shows price failing to take out the resistance and turning back down. The dots in October stood at 1.473 and price got as high as 1.4705. High but not high enough. Taking out these dots now would most likely mean the next trend cycle is up. I doubt it though.

I have drawn voodoo style how I expect the candle for November to look. It calls for a big whoosh south that takes out the previous low in bullocking style. If my analysis is correct, there should be no mercy shown for the bulls this coming month.

And how low do I expect price to trade?

I have drawn a green highlighted circle which shows the area where price exploded higher in a parabolic move. When correcting, price often returns to this exact area and I expect no different this time. This level stands just under 1.27 so price pulling back to that level is my minimum expectation.

I have added Fibonacci retracement levels of the move up from the August 2012 low to the January 2014 high. I'm looking for price to make a deep retracement back to at least the 76.4% level which stands at 1.2605.

One scenario that has me captivated is price pulling all the way back to the April 2013 low level which stands at 1.2219. This would set up a hugely powerful and bullish double bottom with the trend. It is with the trend because it is above the August 2012 low.

Let's wrap it up voodoo style with the yearly chart.


EURAUD Yearly Chart

EURAUD Yearly Chart
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I have added Fibonacci retracement levels of the move down from the 2008 high to the 2012 low. I suspect price is at the beginning of a massive new uptrend but even if price is in a big bear trend then I would expect the first bear rally to make a deep retracement. That would target the 61.8% level at the minimum.

The Stochastic indicator is trending up and looking bullish and there is certainly plenty of upside available.

I have tempered my bearish outlook going into the end of 2014. Previously I was looking for price to trade down and put in its pullback low this year. That's probably me just being an impatient bear.

I have drawn voodoo style how I expect the 2014 and 2015 candles to look. It calls for price plunging into the end of this year before the final pullback low is made in early 2015. Then a massive rally can ensue which makes new rally highs above the 2014 high.

And as always, time will be the judge.

 

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