EUR/AUD Short – Euro Weakness vs. Aussie
Below are our top 3 Forex Trade Ideas going into the weekend. We have avoided USD setups due to the upcoming SINOUS meeting which we expect to generate USD volatility.
| Rank by Confidence | Pair (Current Price) | Bias & Entry | Stop-Loss | Take-Profit Target(s) | Est Risk Return |
| 1 | EUR/AUD (1.757) | Sell ~1.7600 | 1.77 | 1.7400 (intraday), | 2:1 (TP1) |
| 1.7200 (swing) | 4:1 (TP2) | ||||
| 2 | CHF/JPY (174.77) | Sell ~174.50 | 176 | 172.00 (intraday), | 2:1 (TP1) |
| 170.00 (swing) | 3.6:1 (TP2) | ||||
| 3 | CAD/JPY (104.36) | Sell ~104.40 | 105.1 | 102.20 (initial), | 3:1 (TP1) |
| 100.00 (extended) | 5:1 (extended TP) |
Our favorite trade of the 3 is EUR/AUD as it is our highest conviction idea and offers great potential risk reward. We have outlined it below.
1. EUR/AUD Short – Euro Weakness vs. Aussie (Highest Confidence) 📉
Macro View: The euro looks fundamentally weak against the Aussie. The ECB cut interest rates by 25 bps on April 17 (deposit rate from 2.50% to 2.25%) amid slowing growth and warned that escalating U.S. tariffs will hit the euro area economy hard, signaling more easing ahead. Eurozone data have been soft – for example, the May Sentix investor confidence index fell to -8.1 (indicating pessimism) despite slightly beating forecasts. In contrast, Australia’s yields remain relatively high (RBA cash rate 4.10%) and the RBA has so far held off cutting rates (partly due to a pending election). While Aussie policymakers have a dovish bias (markets still price ~70% odds of an RBA rate cut in mid-May), Australia has seen pockets of resilient data (e.g. a jump in construction activity) supporting the AUD. Moreover, Australia’s commodity-driven economy, though facing China trade risks, benefits from still-firm export volumes. Overall, the policy divergence (ECB easing vs. RBA in wait-and-see mode) and growth outlook favor AUD over EUR. Geopolitically, Europe is more directly exposed to any global trade war fallout, whereas Australia could see fiscal support post-election. This macro backdrop gives a bearish bias for EUR/AUD.
Technical Analysis: EUR/AUD is in a clear downtrend on the charts. The pair recently broke below key support levels around 1.7500, indicating sellers in control. Lower highs and lower lows are evident, and bearish momentum is strong. Notably, on May 5 the pair fell to ~1.749 (a new low for the week) as selling pressure intensified. Any pullbacks have been shallow – for instance, an intraday bounce to 1.7580 was capped. On the daily chart, April’s candle was bearish, and a bearish engulfing pattern at the end of April signaled a swing high just above 1.7600, confirming the downtrend. Oscillators like Stochastic became oversold on the 4H, but importantly have not shown a bullish crossover yet, indicating the downtrend may continue despite short-term saturation. The 50- and 100-period moving averages are sloping downward, and price remains below both. Immediate resistance is around 1.7600–1.7650 (recent swing high and breakdown level). We expect this zone to hold as resistance. On the downside, minor support lies at 1.7400 (recent low and round figure), then 1.7200 (a swing low from early 2025). A deeper move could even target the 1.7000 area if euro weakness accelerates.
Trade Setup: We favor a short (sell) position on EUR/AUD on any bounce into the 1.7580–1.7600 resistance area. An entry around 1.7600 is ideal, with a stop-loss ~1.7700 (just above last week’s highs to allow a margin for volatility). Take-profit targets could be 1.7400 for an initial move (intraday to 1-2 day horizon) and 1.7200 for a swing target over several days. This yields a reward/risk of about 2:1 to the first target (200+ pips gain vs. ~100 pips risk) and ~4:1 to the second target. Partial profits can be taken at 1.7400, with the stop moved to breakeven, to ride any extended decline. The high-conviction nature of this trade comes from the strong fundamental alignment (ECB easing vs RBA) and technical downside breakout, making it our #1 ranked setup.
Check out more Forex Trade Setups on our forex page.
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