The EUR/AUD is bullish this week, rallying from around 1.3950 and climbing above 1.43 today (5/28). Let’s take a look at this short-term rally in the context of the medium-term market.
The 4h chart shows that the market is essentially trading sideways throughout May. We can see that price has been up and down the moving averages, which are traveling sideways. However, we can spot a slight bullish bias as price spend most of the time above the moving averages.
The structure is also a completed double 3. In Elliott Wave terminology. this is a consolidation structure with 2 3-wave (ABC) corrections. At the completion of this structure, a bullish attempt would likely be part of the motive wave. This means, the current rally is potentially going to break the current consolidation and open up a bullish continuation scenario for the short and short-medium-term (in June).
If the mode is indeed bullish, price should be anchored above 1.41 and should break above 1.4355 . On the otherhand, if price falls below 1.4050, EUR/AUD would likely still in consolidation, and possibly even turning bearish.
Th daily chart shows a choppy downtrend since late 2014. The decline seems to be in a falling wedge pattern. Since March-April, price action seems to be shifting sideways. We still have lower highs and lower lows, but the bullish attempts are starting to look strong. The wedge is already broken, and price is threatening to clear some more resistance factors such as the 200-day SMA and the resistance area around 1.44-1.4445. Also, the RSI is pushing at 60, a break above which would reflect loss of the prevailing bearish momentum.
A break above 1.4450 should not only flatten the bearish outlook but signal a bullish one with 1.4895-1.49 in sight in the medium-term. This bullish outlook will develop if EUR/AUD can anchor above 1.41 in the short-term. Otherwise, the market would remain bearish-neutral, with pressure down to the 1.3673 low on the year.
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