EURAUD has been in a strong downtrend in the past few months, as indicated by the falling trend line connecting the pair’s recent highs, yet it appears that the pair is in a corrective forex wave pattern. Price recently dipped to the 1.4050 minor psychological support level before showing signs of a potential pullback.
The Fibonacci retracement levels are closely in line with the trend line and the broken support zone around the 1.4300 major psychological resistance level, which suggests that the corrective forex wave pattern might reach until that area.
Forex Wave Pattern Forecast
Stochastic is moving higher, indicating a pickup in buying momentum, which might last until the falling trend line resistance. If you are bullish on the pair, you can jump in a long trade with the corrective forex wave pattern until the trend line. If you are bearish on the pair, you can wait until the forex wave pattern pullback is done and the impulse wave is ready to resume. Stochastic reaching the overbought zone by that time should add trade confirmation.
If the 1.4300 level holds as resistance, the impulse forex wave pattern could take price down at least until the previous lows at 1.4050. Stronger selling pressure could even lead to the formation of new lows below the 1.4000 major psychological support zone.
Bear in mind that the ECB is set to make its interest rate statement this week and possibly announce more easing measures for the euro zone economy, which is currently being dragged lower by bleak German data and the threat of deflation. Additional stimulus or rate cuts could lead the euro downtrend to resume earlier and for the corrective forex wave pattern to be shallow.
As for the Australian dollar, the RBA decided to keep rates unchanged for the time being and emphasize their plans to maintain a period of stability in interest rates.
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