EUR/AUD could be returning to its longer-term downtrend as price action suggests bears are back in control. Will upcoming catalysts spark a fresh move lower?
Longer-term Downtrend in EUR/AUD
We’ve got one for you longer-term players out there, this time on EUR/AUD. Since the beginning of March, EUR/AUD has taken a breather from its longer-term down trend, trading in a range between 1.5300 – 1.5650. But we’re starting to see technical signals that bears may be ready to take the pair lower.
First, the strong area of interest between 1.5600 – 1.5650 once again held off the bulls, turning the pair lower strongly this week, likely with the help of a very positive employment update from Australia today (Australian Bureau of Statistics showed 70,700 net new jobs were created in March, double forecasts of a 35,000 gain).
Second, that downward spike is now breaking the rising ‘lows’ pattern, all while stochastic is coming out of overbought territory.
These price action patterns could be enough to draw in technical traders to make a play on the downtrend, and next week we could get economic catalysts that could bring in the fundamental players.
On Thursday, we’ll get the latest monetary policy statement from the European Central Bank, then on Friday, the latest business sentiment data from Europe will arrive, and both events do have the potential to kick up volatility quickly for the euro.
With the right bearish catalysts (e.g., disappointing PMI data, dovish talk from the ECB), EUR/AUD could make a move for the 1.5000 handle within the next week or two, based on its weekly ATR of around 250 pips. That makes for a solid potential return-on-risk if using the other side of the resistance area as a stop guide.
So, we’re watching those events for potentially euro bearish scenarios to fuel the downtrend in EUR/AUD. But what do you all think? Are you watching EUR/AUD for a downtrend move, or do you see something that will turn that breakout into a fakeout? Let me know in the comments section below!
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