EUR/AUD has found bullish traction once again following hawkish ECB cut

EUR/AUD has found bullish traction once again and sits on the 1.61 handle following the European Central Bank event which let the doves down with a hawkish rate cut for the bare minimum.

The ECB cut the deposit rate 10bp to -50bp and reintroduced QE of EUR20bn. "That volume was towards the lower end of forecasts, but it is open-ended, so longer in duration than expected. The ECB is tiering the deposit rate, and some deposits at the central bank will be excluded from negative rates," analysts at ANZ Bank explained. 

Focus is back on the Fed

The focus now looks to the Federal Reserve next where a rate cut is priced in. "Markets are pricing 24bp of easing at the 19 September Fed meeting, and a terminal rate of 1.21% (Fed funds rate currently 2.13%)," analysts at Westpac explained. The euro can find traction should the Fed cut rates and do so dovishley, indicating further rate cuts if needed down the line. As for the Aussie, trade war tensions have eased up fuelling a bid on the commodity sector which the Aussie trades as a proxy. 

EUR/AUD levels

The cross burst below the critical support area made up of the 200-daily moving average, trendline support and a 50% mean reversion of the November July upside range, but was driven right back and to a higher close leaving a bullish pin bar on the daily charts. Bulls can target the 21 and 50-daily moving average that meets the 38.2% Fibo' of the aforementioned range located in the 1.6240s guarding a run to the May spike highs and the 23.6% Fibo located at 1.6450.