Just wanted to quickly note a few more potential setups this week before calling it a night...

AUD/USD

After a prolonged uptrend, AUD/USD has been consolidating as of late on the daily chart, forming a nice symmetrical triangle. Today, the pair broke down through the bottom line of the triangle, offering us a potential short opportunity.  Time will tell us whether this is actually the beginning of a significant move down.

EUR/GBP

Today's action saw the EUR/GBP test a rising trendline serving as support.  This could be a good opportunity, depending on how the next few days unfold.  If the pair respects the trendline, it could be a good long opportunity, especially considering that the general trend since the beginning of August has been up.  On the other hand, if the pair breaks down through the trendline, it might be a good short opportunity (after all, we did have a lower high to start off the month of December).  For now, I'm sitting on the sidelines waiting for this pair to show its hand.

EUR/AUD

EUR/AUD may be forming a bottom after being in a downtrend for months.  The pair appears to be forming the right shoulder of a potential inverse head and shoulders pattern.  Today we saw a strong move up from the most recent bottom, and I'm expecting a move up, at least in the near term.  As always, I could be wrong though.

The overall trend of EUR/AUD has been up since July 2008.  However, looking at just the past six months, the pair has been in a fairly wide sideways trend, bouncing between 1.8500 and 2.1000.  In the past three months, though, we've seen the pair consolidate, forming a nice symmetrical triangle.

The triangle is reaching the point where price has to break out one way or another, and I plan to jump on board with a position when it does.  Hopefully we'll see a nice sustained move in the direction that it chooses to break, but I'm always aware of the possibility of a fakeout.

I'm going to straddle the recent activity by placing a buy order above the recent high of 2.0027 and a sell order below the recent low of 1.93724.  It's possible that neither will be hit in the next few days, especially since we're approaching the weekend, but if the pair does happen to break, I'll be ready.

• Initial Long Entry:  2.0037
• Initial Stoploss:  1.9837

• Initial Short Entry:  1.93624
• Initial Stoploss:  1.95624

Too many times in the past few months have I thought "pair ABC looks like it may break the trendline and really take off" or "we could see pair XYZ bounce nicely off of that trendline and move in the opposite direction", only to come back in the morning or after work and find that the pair did in fact move as I had anticipated and I had missed a large portion of the move.

Of course, this is the risk I run trading longer timeframes and choosing to sleep and go to work every now and then.  I accept the fact that I will miss good setups from time to time, but I think I can do a better job of catching some of the moves.

Tonight, I see another possible move shaping up on EUR/GBP, but this time I will be prepared.  Check out the daily chart of this pair below.  After a nice uptrend that lasted several months, we saw a lower high in late January, followed by a trendline break last week.  I missed the opportunity to short the trendline break.

Over the past day or so following the trendline break, the pair has retraced significantly, presenting another possible short opportunity.  If we zoom in to the 4 hour chart, shown below, we see that the pair is approaching the falling trendline.  Rather than wait for a bounce, I'm going to be proactive and anticipate a bounce off of the trendline by entering a short order just below near-term support around 0.8980.

So, if the pair bounces and moves south, I'll catch the train.  My initial stoploss will be just above near-term resistance and above the falling trendline.  We'll see what happens.

• Short Entry:  0.8980
• Initial Stoploss:  0.9087

Edit 2/5/09 8:15 AM:  My short order was hit yesterday and the pair made a nice move in my direction, stalled a bit, and is now continuing its move south.  I took profit on half of my position at 0.8863 for a profit of 117 pips (just over 1R).  I'm letting the other half of my position ride until the trend turns around.

Edit 2/10/09 10:55 AM:  The second half of my position was closed this morning as the pair rallied above resistance where my stoploss was placed.  Out on the second half at 0.87821 for a profit of 197.9 pips. 

The Euro broke its down trendline last week and established a higher high.  The safest way to play a trendline breakout to wait for a pullback, and that's exactly what I'm doing.  The pair has pulled back nicely, and if I see a bullish candle or two in the near future, I think I'll jump on board and see what happens.  But for now, I'm just watching and waiting.  Hopefully, it won't decide to take off while I'm asleep tonight.

Below's the 4 hour chart of EUR/USD.

EUR/USD is consolidating with resistance above and support below.  The prevailing trend on the daily chart is up, but the medium term trend on the 4 hour chart is down, so I'm looking for a breakout in either direction and am straddling the pair with a buy order above the current price and a sell order below.

Check out the daily and 4 hour charts below...

Daily Chart:

4 Hour Chart:

Breakout Possibilities

We've got a down trendline on the 4 hour chart that has been tested several times in the past few days and held.  A break above this line would mean a resumption of the prevailing trend on the daily chart.

However, we've also got an area of support around 1.3830 that has been tested several times in the past.  Note that this is more of an area of support, rather than a specific level, as we've seen the pair react multiple times to each of the three horizontal dotted lines.  A break below this area would mean a continuation of the medium term trend.

I think a move that breaks in either direction could have some legs.

• Long Entry:  1.3996
• Initial Stoploss:  1.3799

• Short Entry:  1.3799
• Initial Stoploss:  1.3938

Update 1/5/09 6:33 AM:  The Euro broke down strongly through support overnight, so I'm currently short.  Since it's moved 1R in my direction, I've closed half of my position and move my stop on the other half to breakeven.  It's nice to start of the New Year with a win!