On Wednesday I looked at shorting EUR against AUD ahead of the ECB's liquidity injection (LTRO). The reversal pattern is now complete, and indications are in favour of a test of 1.2134, the all time low for EUR:AUD. In fact, there is a case for adding to short positions.

The original entry is here:


And here's the updated 4 hour chart:

Undoubtedly, some traders will argue that this is not a "head and shoulders" pattern, as the left shoulder doesn't exactly match the criteria. Whether or not this is the case, for mine this is still a reversal pattern - a high, a trough, a higher high, a trough, a lower high, and a fall through the trough line (the yellow line on the chart).

This fall through the trough, combined with a fundamental increase in EUR supply, and the interest rate differential between EUR and AUD (more than 3%), leads me to think there is "lolly" in staying short EUR:AUD.

To add to existing positions, I turn to the 5 minute chart:

My trade is to SELL EUR:AUD at current levels (1.2337), with a tight stop loss above 1.2350, looking for a move below 1.2175.