With big time economic events coming soon from both Australia and Europe, it’s time to check out the downtrend in EUR/AUD for possible fresh opportunities to play the trend.
EUR/AUD Downtrend Bounce Ahead?
Looking at the forex calendar for the rest of July, I see quite a few potential catalysts for both the Australian dollar and the euro that makes EUR/AUD an attractive pair to play.
This week, we’ve got the Australian employment update to move the Aussie, while next week’s European PMI’s and the European Central Bank’s latest monetary policy statement should get the euro cooking. The ECB’s statement is the most notable of the group, and based on recent weak sentiment data (The ZEW Indicator of Economic Sentiment for Germany decreased slightly to -24.5 in July 2019) and rhetoric from the ECB that they are readying for policy easing, we are likely to see some sort of stimulus actions by the ECB next week. This has me leaning bearish on the euro, which is inline with the current trends in price action.
As far as the Aussie, recent data has seen improvement (e.g., Australian retail sales rise in May, Australia’s manufacturing sector finished off the second quarter on a stronger note, Australia Trade Surplus Rockets to Record), lowering the probability of any further near-term rate cuts from the RBA. The Australian employment update is likely to shift that picture if the overall report comes in weaker-than-previous, which could be a good thing for EUR/AUD bears by pushing the pair higher to a better entry price.
On the four hour chart above, the market is currently trading around 1.6000, and if the data does come in weaker (as expected) then it’s possible EUR/AUD could bounce higher to the Fibonacci retracement area (around 1.6060 – 16130). If it finds resistance there after the Aussie jobs data, I will look to open up a short position.
That’s the scenario I’m looking out for before entering in fresh orders on EUR/AUD. What do you guys think? Let me know in the comments section below!
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