Best analysis

Below we have a daily chart of the EUR/AUD. Similar to the EUR/USD, consolidation is the name of the game. But within the consolidation, it looks like a new trend is emerging, at least for the EUR/AUD anyway. There are lots of factors to observe in this chart.

Let’s start with the secondary indicators first. The MACD is trending lower below its signal line and is moving below zero. Meanwhile, the RSI – having already formed bearish divergence – has broken below a short-term bullish trend and is moving towards 40 – below here would point to downward momentum. So, both of these momentum indicators are pointing to a breakdown in the underlying EUR/AUD currency pair.

Meanwhile the 50 and 200 daily moving averages are getting close to one another, too. And with the 50-day SMA flattening, this points to a potential “death crossover” soon. When the 50 is below the 200 SMA, some momentum traders would like to fade the rallies rather than buy the dips. For now however, they are still in the “right” order, so we shouldn’t jump into any conclusions.

The study of price action itself is, as ever, the most important indicator. On this front, the EURAUD’s repeated failure to rally above 1.6250 since August of last year, suggests price has formed a top; more precisely, a triple top reversal pattern. The last attempt to break above 1.6250 ended with the formation of a very nice doji candle at the highs. There, the RSI was also in a state of bearish divergence. Obviously hindsight is a wonderful thing, but the power of the rejection there can still be ‘felt’ – look, for example, at how aggressively price has moved lower following that rejection.

At the time of this writing, the EUR/AUD was hovering around the pivotal 1.5250 level, which had been strong support and resistance in the past. Price was also holding above the 200-day SMA. The hesitation here is not a major surprise given the extent of the downward move we have seen already. Put another way, bearish speculators are probably taking some profit here. But the lack of a significant bounce so far suggests that price may break further lower over the coming days.

If the EUR/AUD breaks down as the above technical indications suggest, the next potential bearish targets could be the 61.8% Fibonacci retracement at 1.5080, followed by the psychologically-important 1.50 handle and then the bullish trend line at around 1.4750. This technical bearish setup would become invalid in the short-term if resistance at 1.5500 breaks on a daily closing basis. The longer term outlook would still remain bearish for as long as price holds below the 1.6250 ceiling.

Finally, given the growing divergence of monetary policy stance between the RBA and the ECB, the fundamentals meanwhile also point to lower levels for the EUR/AUD – especially if the ECB decides to expand its QE programme in March. 

002

Trading leveraged products such as FX, CFDs and Spread Bets carry a high level of risk which means you could lose your capital and is therefore not suitable for all investors. All of this website’s contents and information provided by Fawad Razaqzada elsewhere, such as on telegram and other social channels, including news, opinions, market analyses, trade ideas, trade signals or other information are solely provided as general market commentary and do not constitute a recommendation or investment advice. Please ensure you fully understand the risks involved by reading our disclaimer, terms and policies.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.

EUR/USD News

GBP/USD extends sideways grind above 1.2600

GBP/USD extends sideways grind above 1.2600

GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.

GBP/USD News

Gold pulls away from daily highs, holds above $2,200

Gold pulls away from daily highs, holds above $2,200

Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.

Gold News

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase. 

Read more

Portfolio rebalancing and reflation trades emerge into Q2

Portfolio rebalancing and reflation trades emerge into Q2

Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.

Read more

Majors

Cryptocurrencies

Signatures