After previously forming a double top reversal pattern, EURAUD made a strong downside break of support, confirming the selloff. The chart pattern is around 800 pips tall so the downtrend could last by the same number of pips, taking price down to the 1.4400 levels.
The 100 SMA is crossing below the 200 SMA to indicate a return in bearish pressure. However, stochastic is already in the oversold area so sellers might already be exhausted. RSI is even turning up from the oversold levels to suggest a quick correction to the broken neckline.
If so, a pullback to the 1.5200 former support zone could take place before more sellers take this pair lower. A move past that area could lead to another rally up to the tops at 1.6000.
Earlier in the week, the euro zone flash CPI estimates came in much weaker than expected and revived deflation fears. The ECB is set to have a policy meeting later on in the month and might decide to add fresh stimulus to the economy.
Meanwhile, the RBA has maintained a relatively optimistic outlook, highlighting the pickup in the non-mining sector and the labor market improvements. Data from Australia came in stronger than expected today, as the GDP rose 0.6% versus the 0.5% forecast.
Up ahead, retail sales and trade balance figures from Australia might prove to be event risks. However, the recent decision of the Chinese central bank to lower the reserve ratio requirement and spur more lending activity could provide support for businesses and demand for Australia’s commodity products down the line.
As for the euro, no other event risks are set until the end of the week, leaving the euro to move to the tune of risk sentiment. So far, the shared currency appears to be acting as a safe-haven in risk-off days.