It has been an interesting week for EURAUD, with the pair doing a very abrupt about-face as the euro proved more resistant to USD strength. Also, falling iron ore prices and disappointing Chinese economic data has hit the Australian dollar. The end result has been a significant rally in EURAUD which has pushed the pair off a key support zone just above 1.4200, through its 100-day SMA and on to its 200-day SMA.
This key resistance level around its 200-day SMA is proving to be a strong barrier for price and the technicals aren’t looking good at the moment. There is a shooting start formation on a daily chart which is a potential indication that bears may be about to regain control of EURAUD. In the past this type of rejection around its 200-day SMA has resulted in a quick and painful sell-off.
In the event that price ignores the aforementioned bearish technical indicators, it would negate our bearish view. This may reinforce a possible long-term bullish indicator – a double-bottom in price on a daily chart – and send the pair towards another resistance zone around 1.4700.
Source: FOREX.com
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