EURAUD has been climbing recently but these rallies could hit a barrier around the top of the descending triangle on its daily time frame. This is located around the 1.5800 major psychological level, with a turn lower likely leading to a drop towards the long-term support at the 1.4550 minor psychological level.
The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. In addition, stochastic has been indicating overbought conditions for quite some time so buyers are already exhausted. RSI is starting to head south from the overbought levels so a return in selling pressure might be seen.
However, if buyers stay on top of their game, an upside breakout could take place and take EURAUD to the next resistance at the 1.6000 major psychological mark and beyond. The chart pattern is more than 1,500 pips tall so the resulting breakout could last by the same amount.
Earlier today, RBA Governor Stevens emphasized in his testimony that they are very committed to inflation-targeting, hinting that the central bank might cut rates again if necessary. Recall that the Australian central bank already surprised the markets with a 0.25% rate cut this month on weakening inflation expectations.
However, data from the euro zone has been mixed, lending some downside pressure on this pair. German ZEW economic sentiment data is due today and another downbeat result could spur more declines for the shared currency. Analysts are expecting to see a rise from 11.2 to 12.1. Germany’s Ifo business climate index is due tomorrow and a rise from 106.6 to 106.9 is expected.
As for Australia, quarterly construction work done is still due and a 1.4% slump is eyed, following the previous 3.6% decline. Quarterly private capital expenditure is expected to show a 3.2% decline, putting more pressure on the RBA to ease again.
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