It’s been an interesting week for both the euro and aussie, with a lot of movement in both currencies. The Australian dollar has been on cloud nine after yesterday’s strong employment report for March, while the euro continues to juggle with the possibility of Greek default and encouraging economic data. Overall, the aussie proved too powerful for the EUR, sending EURAUD through an important zone around 1.4000 and to its lowest level since mid-2013.
However, some technical indicators are suggesting that the pair has gone too far, too fast. There is a bullish divergence between price and RSI on a four hour chart, which suggests that momentum may be shifting to the upside once more. It would also take a lot for the pair to sustain a break of its 22-month low and it may not have the legs this time around.
Nonetheless, we aren’t ruling out a break in the medium/long-term. The ongoing threat of a Greek default and the possibility that the RBA may not loosen monetary policy further in May significantly weakness EURAUD’s fundamental foundations. If it looks like the RBA won’t in fact lower interest rates further next month, it will remove a ceiling, at least temporarily, that has been placed on the Australian dollar since the idea of looser monetary policy was acknowledged late last year. Meanwhile, the ongoing possibility of Greece defaulting and possibly exiting the eurozone may keep the euro pinned down, despite some encouraging economic data out of the region.
Source: FOREX.com
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