EUR/AUD has been bearish in 2015, but has been consolidating since marking a 1.3710 low on the year in mid-March. The 4H chart shows that after the rebound, the pair went into a sideways consolidation roughly between 1.38 and 1.4070. As we start the week, traders remained bullish in the near-term and pushed EUR/AUD above the consolidation range, signaling further bullish outlook in the short-term.
Let’s take the broken range as a guide for projection. The 1.38-1.4070 range is about 270 pips, and 270 pips above 1.4070 would project EUR/AUD to 1.4340.
Let’s see how the market reacts at 1.42 first. If there is a pullback and price holds above 1.40, forgiving a brief break to 1.3950, then the bullish outlook would still be in play. A break below 1.3950 and a hold below 1.40 thereafter would show bears reviving the prevailing trend.
Indeed, the prevailing trend is what looms over the current bullish breakout signal. Take a look at the daily chart.
If traders bring EUR/AUD towards the 1.43 area, price will likely be challenged by a falling trendline as well as the bottom of the moving average cluster (200-, 100-, and 50-day SMAs). If price does stall around 1.43, and the daily RSI also stalls around 60, the market would remain bearish, and we should anticipate a bearish swing at least towards 1.40 if not to extend the bearish trend to retest the low on the year at 1.3710.
While we should expect resistance around 1.43 in the context of an existing bearish trend, we would have to wait for a break above 1.44 to turn bullish on EUR/AUD. Note that above 1.44, price would break the falling trendline and a key support/resistance pivot. Though it will note have cleared the 200-, 100-day SMAs, if the RSI pushes above 60, we would be able to interpret a loss of bearish momentum. Now, as the saying goes the friend is your friend, and so far in 2015, EUR/AUD has been in a downtrend so limit the current bullish outlook.
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