Quite a few technical arguments for EUR/AUD to fade its current bounce. Will traders take the chart cues despite the risk-off environment?
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
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US 10-yr 2.377% -0.035 Bund 10-YR -0.066% -0.053 UK 10-YR: 0.991% -0.015 JPN 10-YR: -0.064 +0.007 |
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Fresh Market Headlines & Economic data:
- Theresa May signals third Brexit deal vote by Friday
- Tusk urges European Parliament to consider long Brexit delay
- Draghi says the ECB stands ready to act and could delay a rate hike again
- Oil ticks higher even as signs point to another U.S. supply build
- US trade deficit narrows to $51.15B vs. $57B est.
- Likely Fed nominee Stephen Moore thinks rates should be cut by half a percentage point
- China’s industrial profits shrink most since late 2011 as economy cools
- China’s economy picks up as companies pile on debt, survey finds
- U.K. Retail sales fall in March – CBI
- Jacob Rees-Mogg signals he could back Theresa May’s deal despite being vocal critic
Upcoming Potential Catalysts on the Forex Calendar:
- ECB’s Galhau speaks in Geneva at 5:00 pm GMT
- New Zealand financial statement at 11:00 pm GMT
- Fed’s George speaks in New York at 11:00 pm GMT
- New Zealand business confidence at 12:00 am GMT (Mar. 28)
- German inflation (tentative Mar. 28)
- European Sentiment Indicators (tentative Mar. 28)
What to Watch: EUR/AUD
Today, we’ve got a textbook technical setup for traders to possibly jump in short on EUR/AUD. First, we can see the pair is in a relatively new downtrend after breaking consolidation between 1.5950 – 1.6050, but found support at the 1.5800 major psychological handle. The bounce has taken the market back up to the bottom of the consolidation range, where we just saw an evening star triple candle stick pattern form. This lines up with the 50% – 61% Fibonacci retracement and an overbought signal from the stochastic indicator. Everything lines up for a potential reversal back into the downtrend from a technical point of view.
Looking at the fundies, Draghi just commented early today that if necessary, rate hikes could be delayed to support their inflation goals, bearish sentiment for the euro. And for the euro, we have fresh economic updates coming in Thursday’s London session that include German inflation updates and the latest sentiment indicators from the European Commission. These reports could add on top of what has been a negative leaning trend on European economic data. From the Aussie side of the pair, no major catalysts can be seen ahead, so it’s likely the euro side will be the sole driver for the next session or two.
For bears, the technical argument is there, but with global risk sentiment leaning negative today as bond yields and equities fall, this could put pressure on the Aussie. If sentiment shifts towards positive, then the range between 1.5875 – 1.5925 could draw in sellers. For the bulls, the risk-off sentiment works your favor, and if that accelerates, look for a break above the Fibs and today’s highs just under 1.5900 for a short-term long position.