EURAUD Forex Forecast – Quick Uptrend Correction?

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EURAUD recently made an upside breakout from its inverse head and shoulders pattern, confirming its reversal from the earlier downtrend. However, price found resistance near the 1.5100 handle and is now pulling back down to the broken resistance.
This neckline coincides with the 61.8% Fibonacci retracement level, which might keep losses in check. This also lines up with a short-term ascending trend line and the 200 SMA dynamic support. The 100 SMA is above the longer-term 200 SMA, confirming that the path of least resistance is still to the upside. Price is currently testing the dynamic support at the 100 SMA, which lines up with the 50% Fib.
Stochastic is already in the oversold area, which means that selling pressure is already weakening and that bulls could regain control soon. RSI is still on the move down, suggesting that the correction could carry on. A bounce off these support areas could lead to a climb back to the previous highs at 1.5100 or higher.
The RBA meeting minutes are up for release later this week and any indication that the Australian central bank is still open for further rate cuts could mean sharp losses for the Aussie. Data from Australia hasn’t been so impressive, as the economy reported a drop of 3.9K in hiring for August and a slowdown in labor force participation.
Economic reports from China have been mixed, with industrial production and retail sales beating expectations. Inflation figures have fallen short of consensus, though, indicating that these price pressures could spill over to the rest of the global economy.
However, the euro is also dealing with its own set of downside pressures since UK Chancellor Hammond noted that they could lose access to the single European market if the immigration restrictions are granted, also weighing on activity in the euro zone.
To contact the reporter of the story: Samuel Rae at samuel@forexminute.com
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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.