Amidst the sideways movement in major currency pairs, our attention turns to EUR/AUD, which has started to trend higher again.
Inverted Head and Shoulders Pattern
On the daily candle chart for EUR/AUD, there has been a significant development with the formation of an inverted head and shoulders pattern. This pattern indicates a bullish reversal, effectively ending the pullback that started after the highs in August. The breakout above the "neckline" of the inverted head and shoulders pattern is a positive signal, suggesting that short-term momentum is now aligning with the broader trend.
EUR/AUD Daily Candle Chart
Hourly View: Confirmed Uptrend
Drilling down to the detail of the hourly candle chart reveals that EUR/AUD is clearly trending higher. Recent price action on this timeframe has seen the market consolidate in a tight range near recent highs, forming a small bull flag pattern. This high and compact consolidation often signifies a continuation of the current trend.
EUR/AUD Hourly Candle Chart
Risk management
Traders looking to participate in this uptrend could place stops below the bull flag lows on the hourly candle chart. A profit target of 2X risk looks is reasonable for a trend continuation trade of this nature.
On the economic calendar, we have Australian inflation data on Wednesday and European Central Bank monthly interest rate decision on Thursday. These events have the potential to cause outsized volatility for the EUR/AUD currency cross and should be factored into risk management and position sizing.
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