The EURAUD has been trapped in a bearish price channel over the past few trading sessions as visible in this H4 chart. This currency pair currently rests at support levels and has started to form a temporary bottom which can be viewed by the last five candlestick formations. We believe this pair will attempt a rally back into its declining resistance level which is enforced by its declining 50 DMA.
MACD has formed a positive divergence which supports the prediction for a rally while RSI has formed a positive divergence of its own while it also experienced a breakout from oversold territory.
We recommend a long position at 1.2435 which would be an addition to our previous two long positions we took on February 19th and March 7th at 1.2900 and 1.2695 respectively. We also recommend a stop sell order at 1.2385.
Traders who wish to close this trade at a loss are advised to place their stop loss order at 1.2385. We do not use stop loss orders and will execute this trade as recommended. Place your take profit level at 1.2735.
Here are the reasons why we believe this forex pair will rally into its 50 DMA
- Price action at low end of chart pattern
- Last five candlesticks point to a temporary bottom
- MACD formed a positive divergence
- RSI formed a positive divergence
- RSI showed a breakout from oversold territory
- Short covering rally
