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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
DAX: 11458.19 +0.34%
FTSE: 7186.70 -0.13%
S&P500: 2817.41 -0.04%
DJIA: 25652.96 -0.02%
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
Oil: 60.23 +2.40%
Gold: 1315.20 -0.56%
Bitcoin: 4010.20 +2.38%
Etherium: 137.86 +3.47%

Fresh Market Headlines & Economic data:

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

EUR/AUD 1-Hour Forex Chart
EUR/AUD 1-Hour Forex Chart

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.