As traders are well aware, market reaction to news events like today’s RBA decision can be lightning fast.
Technical analysis and stop entry orders can assist in these situations. Where traders can identify break out set ups in advance of a news event, a stop entry order can be set in advance to react automatically if the news event happens to go the right way.
The 15 minute EURAUD chart is one that caught my eye as a possible example of this approach this morning.
This chart has formed an ascending triangle.
A confirmed break through the triangle resistance would be a typical set up here looking for a continuation of the trend leading into the triangle and a larger correction of the last major downswing.
Of course this may trigger prior to the RBA announcement. However, another alternative would be a rally and break to the upside if the bank cuts by 0.5% or the statement maintains a clear easing bias
The target in this strategy projects that the swing up from B will be the same size as the swing up to A. This coincides closely with a projection of the triangle height from the top of the triangle. However, I haven’t shown this measure on the chart to avoid a Fib line overload.
Given that the triangle is now becoming fairly narrow a typical stop strategy would place the initial stop just behind the triangle support