EURAUD has been a major beneficiary of widespread AUD weakness in the last couple of weeks. This has helped to propel the pair to a key resistance zone around its 100-day SMA, a break of which could highlight some technical strength in the pair.
However, the pair is starting to look a little top heavy on shorter time frames - there is some bearish divergence between RSI and price on a 4-hr chart. Also, momentum seems to shifting across a few time frames to the downside, but this may suggest consolidation, as opposed to bearish price action.
The key test for this pair from a technical standpoint will be the aforementioned resistance zone around its 100-day SMA (see chart). If price fails to break here it may begin to retrace some of its recent gains, in which case we would be looking at the common Fibonacci retracement levels.
From a fundamental standpoint, both the euro and the aussie are looking somewhat weak, but the former appears more weak. A speech by ECB President Draghi tonight will an important event for the euro, as will a slew of manufacturing PMI releases tomorrow. For the Australian dollar, the market is going to be carefully analysing tomorrow’s flash September private sector reading of Chinese manufacturing PMI. The market is expecting the much-watched index to drop to 50.0, which is the level that separates pessimists from optimists. Later in the week, RBA Governor Stevens is speaking which always has the potential to move the aussie.
Source: FOREX.com
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