By: Christopher Lewis
The EUR/AUD pair is one that a lot of traders will ignore. It isn’t considered one of the major pairs by many traders, but it does include two major currencies. It is a great way to play risk appetite in the market, and also a great way to express distrust of the Euro as well. The pair has been in a strong downtrend for quite some time, and has even recently broke a 20 year low at 1.29 to send the pair into another area of consolidation just below the 1.25 handle.
The pair has bounced a bit over the last several days, and this could be a reaction to the fact that people no longer think Europe is going to implode in the middle of the night. But the truth is that there are a lot of unanswered questions to be resolved in the European Union, and while the immediate concerns may be dealt with – we have serious structural problems that are waiting to be worked out.
The Aussie will continue to get a lift from the desire to own gold by traders, and the Euro should continue to suffer from serious lack of confidence by many participants. The positive swap to be short of this pair also could help traders looking for some kind of yield as well.
1.25 Just Ahead
The 1.25 level is just above, and the market looks ready to test it. This is one of those areas that I personally love to find trading signals as the move is normally fairly obvious. (I know there is a certain amount of “mystic” to trading that people want – but give me obvious any day.) The level should produce some kind of reaction, and if it shows weakness, I am ready to short this pair yet again. I like this because it is with the trend, and at an obvious spot.
.png "EUR/AUD 2/23/12")
It should also be noted that the level is also the 50% retrace from the 1.29 level that gave way a while back. Because of this, I suspect there are a lot of traders that want to join in to the short side. Also, as a side note, the Euro is struggling against the Dollar at current levels. Perhaps a Euro pullback is in the cards?