Trade idea: EUR/AUD

Source: Bloomberg

Having suggested short EUR/AUD trades on 2 November and trialling my suggested stop loss on a number of occasions, we've gotten to a point where the downside looks poor. There is a heightened risk of short covering rally.

Having entered the idea at A$1.5450, EUR/AUD is trading at A$1.4714 and 736 pips, or 4.7% in the money. With stochastic momentum and the nine-day RSI at extremes, I would look to lock-in profits.

The trend should be respected though. I would look to establish sell limits at the 38.2% retracement of the recent leg lower at A$1.4925. 

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