Written :- Harish Shahi- Sr. Commodity & Forex Analyst
The recent uptrend in the EUR/AUD seems to be performing a correction as the pair broke below a rising trend line and formed a fresh lower high and lower low on the 4-hour chart.
From a technical standpoint, it seems like more weakness might be ahead for the pair as the correction is progressing, with the 38.2% Fib retracement level at 1.6060, acting as a potential short-term support for the price. Further below, the 61.8% Fib retracement level at 1.5875 might be a tough nut to crack as it also aligns with the upper bounds of July’s trading range.
Odds are in favor of bears and intraday bias remains bearish on the pair as long as yesterday’s high of 1.6332 remains in-tact. In the shorter-term, today’s intraday high of 1.6167 may also act as a strong resistance for any potential up-move.
Two consecutive bearish marabuzo candlestick on the daily chart which is generating bearish signal and pair is trading below the major and minor EMA lines which is providing us bearish signal and a daily closing below the 1.6000 level will the way towards the 1.5800 level in near term.
Traders need to pay close attention to the overall risk appetite in the markets when trading the EUR/AUD pair. Risk currencies have not been well supported by developments in international trade policies, which could continue to weigh on NZD and AUD. Only if the EUR/AUD pair manages to form a bearish reversal candlestick pattern with today’s close then we can consider further shorting the pair.
The way bears are reacting it seems like bears have snatched the bite from bull’s mouth and they are it’s a clear indication of trend reversal i.e. pair has topped out.
Shifting attention to our short-term oscillators, we see that the RSI turned down after it hit its respective downside resistance line, and then crossed below 50, while the MACD, already given a bearish crossover from the over bough territory. The 1.6000 is immediate support level followed by 1.5870 level whereas 1.6250 level is immediate resistance level followed by 1.6500.