EUR/AUD plunged to its weakest level since Sept 2014 largely tracking losses in the EUR/USD pair as the euro was heavily sold‐off below 1.0650 levels during the European session. EUR/USD fell to fresh twelve year lows at 1.0560 levels as renewed selling was triggered on Draghi’s comments which markets viewed it as negative. On the other hand, the Aussie remained more or less rangy around 0.76 barrier. EUR/AUD currently trades at 1.3907 levels, ‐0.86% lower on the day, having breached strong support at 1.3945 levels.
The cross is expected to test crucial support at 1.3650 levels from the current levels by this Friday as:
1. EUR undermined after Euro area yields at record lows on the 3rd day of QE program:
EUR/AUD is expected to continue its descent largely as the shared currency remains extremely vulnerable across the board after ECB’s massive QE program launch which has sent borrowing costs of the euro area tumbling today‐ the third day of the launch with German 10‐year Bund yields, which fell to a new record low of 0.198% during the session. Most other euro area bond yields were at or close to record lows. French and Italian 10‐year yields were down around 2‐1 basis points at 0.461% and 1.210%, respectively.
2. Stronger USD and Greece concerns weighs:
The ongoing upsurge in the US dollar across its major counterparts for the last seven sessions on increased bets of a June rate hike has exacerbated the pain in the shared currency knocking it off to 1.0560, the lowest levels in 12 years. The persistent weakness in the euro is likely to drag EUR/AUD further in to losses.
Further, looming concerns over Greece whether the debt‐stricken nation will repay its EUR350m debt to the IMF due on Friday amid ongoing negotiations and disagreements between Greece and Euro group ministers is likely to remain a negative for EUR/AUD.
3. EUR bears unstoppable after Draghi’s comments:
EUR/AUD continues to be offered after ECB President’s Draghi’s speech was considered as anti‐euro as markets viewed it as ECB chief defending QE program, which triggered a further sell‐off in the cross. Speaking in Frankfurt today, Draghi said that inflation expectations picked up in the last weeks, while the ECB policy will guarantee price stability in the long term. Moreover, Draghi pointed that GDP growth was revised upward due to oil prices, the euro exchange rate and quantitative easing. Draghi noted, "Of course, these improvements cannot and should not solely be attributed to our monetary easing. But our monetary policy is certainly supporting the recovery."
4. RBNZ rates on hold stance likely to support AUD:
The Reserve Bank of New Zealand (RBNZ) is widely expected to keep interest rates on hold at tomorrow's Monetary Policy Statement (MPS) and cash‐rate announcement. RBNZ’s status‐quo is likely to be a positive for the entire antipodean complex including the Australian dollar. Hence, an expected rebound in the Aussie above 0.7600 levels is expected to drown EUR/AUD lower.
5. AUD to be boosted by upbeat Aus employment data :
Australia's official employment report due tomorrow is expected to show the Australian economy may have added a net 15,000 jobs in February, partly offsetting January's 12,200 net job loss. Moreover, Australia's jobless rate is forecast to have held at 6.4% in February. A slight improvement in the OZ employment scenario is likely to boost the Australian dollar against the single currency.
Technically, EUR/AUD has formed a head and shoulder pattern on daily charts and the pair is expected to test the neckline support that lies at 1.3650. The cross has already breached the crucial support at 1.3945 levels, which opened the doors for further downside to 1.3650. A fresh sell‐off is likely to trigger below a break of that level, dragging the pair to test 1.3400 levels. However, with the daily RSI at 30.17 levels, in an extremely oversold zone, the pair is expected to hold the neckline support and may bounce‐back to 1.38 barrier.
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