A quick look at the daily chart of EUR/AUD will easily reveal that the currency pair is on a down trend. The currency pair has been making lower highs and lower lows and has consequently formed a descending channel.
However, it may be worth your while to examine the pair closer. EUR/AUD is up more than 200 pips from its 8-month lows and has made its way back up to the top of the channel. But wait. Take a look at the last two candlesticks that materialized—a spinning top and a doji—both considered as reversal signals. Uh oh, does this mean we will soon see EUR/AUD resume its down trend?
Don’t be surprised if it does. The area where it is trading now is also the 50% Fibonacci retracement level of the high established on July 3 at 1.4590 to the swing low at 1.4201.If 1.4400 holds, we may just see EUR/AUD make its way towards hitting new lows!
On the other hand, if resistance on the psychological handle doesn’t hold up, we could see the currency pair tick up to around the 1.4600 level and test its highs for early July as well as the 100 SMA.