EUR/AUD has been in a strong downtrend, with the falling trend line connecting the highs of the price on the 4-hour time frame still intact. Stochastic is in the overbought zone, indicating that bulls are already exhausted. A move below the 80.00 level would suggest that selling momentum is about to pick up and that price would head south.

The 61.8% and 50% Fibonacci retracement levels are closer to the trend line resistance, with the former coinciding with a broken support zone. A bearish divergence appears to be forming, as stochastic made higher highs while price made lower highs, supporting the idea of trend continuation.

Shorting at 1.4600 with a wide stop of 150 pips above the trend line and a target of 1.4400 or the previous lows could yield more than a 1:1 return on risk.

By Kate Curtis from Trader’s Way