Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, digests the market action seen in week 43 and gives his tactical positing. Van-Petersen favours a USD step back, sees gold consolidating, and believes that European equities are overheated.
Medium term
Trade view / 16 June 2016 at 10:08 GMT

Long-term bias for EURAUD remains bullish

Analyst / PIA First
United Kingdom

Going to look away from the USD this morning and highlight EURAUD as a good medium-term buying opportunity. Not only does this have a good basic technical outlook, if stocks continue to drag lower, then AUD should devalue at the same time, making correlations also a prime factor. 

The long-term chart highlights an impulse move from 2008 to 2011 (2.1126-1.1602). Although we did see a correction lower close to the 50% pullback level of 1.6365, it has lacked strong momentum and the trend of higher lows remains intact.

We look to be forming an Ending Wedge pattern with plenty of scope for a move to the upside. The most notable factor here is that the trend of higher highs lines up with the 61.8% Fibonacci level at 1.7488. As long as the wedge base (1.4600) remains intact, the bias is bullish. 

 Monthly (inside Wedge):EURAUD M
Source: Saxo Bank

The weekly chart gives a clearer picture of this volatile price action inside the wedge. We had an impulsive move from close to 1.4500 and have retraced mildly from the week of May 23's high.

We have paused at the base of the weekly Ichimoku Cloud. This area was also pivotal in Q4 2014 and Q1 2016. The trend of lower highs is seen at 1.6000

Weekly (stalls at cloud base):
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Source: Saxo Bank

The daily chart highlights a possible bullish Outside Day today if we close at current levels. This is essential for the trigger of this medium term trade call. 

Daily (possible Outside Day):
Source: Saxo Bank

Even a more aggressive dip should find buyers at our bespoke support at 1.5055 with this lining up with the 50% pullback level of 1.5044

Two other interesting facts here. The 127.2% Fibonacci is just below the trend of lower highs and is a good upside barrier (1st target). The 261.8% coincides with the long term target of 1.7500

Source: Saxo Bank


Entry: if EURAUD has a daily close above 1.5280, buy two units or Buy one unit at market and one unit on a dip to 1.5055.

Stop: 1.4850.

Target: 1.5950 and 1.7450.

Time horizon: within the next quarter (July 1 to September 30)

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more


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