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EUR/USD, AUD/ USD Channel Scalp Setups- Status Pending

By , Currency Strategist
07 November 2011 22:14 GMT

These are the current setups we will be considering this week in the EUR/USD and the AUD/USD. Although our longer-term bias on both these pairs is weighted to the downside, we note that further developments out of the region could spark substantial swings as markets absorb every headline crossing the newswires with the risk of a topside move of some magnitude very possible. Accordingly our topside limits on these particular setups are rather tight with a breach above negating our long-term bias.

EUR/USD Scalp Setup

EURUSD_AUDUSD_Channel_Scalp_Setups-_Status_Pending_body_Picture_2.png, EUR/USD, AUD/	USD Channel Scalp Setups- Status Pending

The EUR/USD has continues to trade within the confines of an ascending channel dating back to the November first low at 1.3607. A break below the convergence of trendline support and the 23.6% Fibonacci extension taken from the October 27th and November 4th crests at 1.3715 eyes profit targets at 1.3680, 1.3655, the 38.2% extension at 1.3620 and the bottom limit at 1.3590.

Interim resistance now stands with short term trendline resistance taken from Friday’s high, backed by 1.3820 and 1.3865. A breach here risks further losses for the greenback with such a scenario eying topside targets at the 1.39-figure and 1.3950. An hourly ATR of 43.86 yields profit targets of 33-37pips depending on entry.Should ATR pull back dramatically, adjust profit targets as needed to ensure more feasible profit targets.

Event risk for the pair mounts tomorrow with the release of the German trade balance figures. Although this data is typically a central focus, the current situation in Europe continues to see traders focused on Greek and Italian developments. That said, traders should be mindful of the release and avoid holding scalps through the print.

*Note that the scalp will not be active until a break below 1.3760 or a rebound trendline resistance with RSI conviction. We will remain flexible with our bias with a move passed the topside limit at the 1.3865 eyeing topside targets.

Key Thresholds

Entry/Exit Targets

Timeframe

Level

Significance

Resistance 1 Target

30min

1.3820

Basic Resistance

Topside Limit

30min

1.3865

Friday High (0% Fibonacci Ext)

Topside Limit Break-Target

30min

1.3900

Soft Resistance

Topside Limit Extended Break-Target

30min

1.3950

Basic Resistance

Support 1 Target

30min

1.3715

23.6% Fibonacci Ext

Support 2 Target

30min

1.3680

Soft Support

Support 3 Target

30min

1.3655

Soft Support

Support 4 Target

30min

1.3620

38.2% Fibonacci Ext

Bottom Limit

30min

1.3590

Soft Support

Bottom Limit Break-Target

30min

1.3545

50% Fibonacci Ext (5-week low)

Average True Range

1hour

43.86

Profit Target 33-37 pips

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

11/8

7:00

MEDIUM

German Trade Balance (euros) (SEP)

12.5B

11.8B

11/8

7:00

LOW

German Current Account (euros) (SEP)

12.3B

7.0B

11/8

7:00

LOW

German Exports s.a. (MoM) (SEP)

-0.5%

3.5%

11/8

7:00

LOW

German Imports s.a. (MoM) (SEP)

0.4%

0.0%

AUD/USD Scalp Setup

EURUSD_AUDUSD_Channel_Scalp_Setups-_Status_Pending_body_Picture_3.png, EUR/USD, AUD/	USD Channel Scalp Setups- Status Pending

The Australian dollar has also remained within the confines of its own descending channel dating back to Thursday’s high at 1.0440. A break below interim support at 1.0350 with RSI conviction puts our scalp into play with profit targets held at the 23.6% Fibonacci extension taken from the October 27th and November 3rd crests at 1.0315, 1.0280 and 1.0240. A break here risks further losses for the aussie with extended targets seen at 1.0210 and the 50% extension at 1.0170.

Interim resistance holds at 1.0390 backed by trendline resistance and 1.0440. A breach above this level negates our short-term bias with such a scenario eyeing topside targets at the 1.05-figue, 1.0550, and the 1.60-handle. An hourly ATR of 34.94 yields profit targets of 27-31pips depending on entry. Should ATR pull back dramatically, adjust profit targets as needed to ensure more feasible profit targets.

Event risk on the pair should be negligible barring a substantial miss on tonight’s Australian trade balance figures. Again we suggested that traders refrain from holding scalps through the data release.

*Note that short-scalps will not be active until a break below 1.0350 or a rebound off 1.0390 or subsequent resistance levels with RSI conviction. We will remain flexible with our bias with a move passed the 1.05-figure eyeing topside targets.

Key Thresholds

Entry/Exit Targets

Timeframe

Level

Significance

Resistance 1 Target

30min

1.0390

Soft Resistance

Resistance 2 Target

30min

1.0440

Thursday’s High / 0% Fibonacci Ext

Topside Limit

30min

1.0500

Basic Resistance

Topside Limit Break-Target

30min

1.0550

Soft Resistance

Topside Limit Extended Break- Target

30min

1.0600

Basic Resistance

Support 1 Target

30min

1.0350

Soft Support

Support 2 Target

30min

1.0315

23.6% Fibonacci Ext

Support 3 Target

30min

1.0280

Basic Support

Bottom Limit

30min

1.0240

38.2% Fibonacci Ext

Bottom Limit Break-Target

30min

1.0210

Soft Support

Bottom Limit Extended Break- Target

30min

1.0170

50% Fibonacci Ext

Average True Range

1hour

34.94

Profit Targets 27-31 pips

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

11/8

0:30

MEDIUM

Trade Balance (Australian dollar) (SEP)

3000M

3100M

11/8

0:30

MEDIUM

NAB Business Confidence (OCT)

-

-2

---Written by Michael Boutros, Currency Analyst with DailyFX.com

To contact Michael email mboutros@dailyfx.com or follow him on Twitter @MBForex for updates on this scalp and other trades.

To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@dailyfx.com

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07 November 2011 22:14 GMT