This pair continues to trend higher but is stuck at its mid-channel area of interest visible on the daily time frame. Think it’ll go for a pullback or an upside break?
Long EUR/AUD Idea
Talk about tight consolidation! Buyers and sellers are in a gridlock at the middle of the channel, with neither side looking ready to give way anytime soon.
Stochastic is indicating overbought conditions, though, so euro bears and Aussie bulls could win out and lead to a move back to the channel support. Slightly stronger than expected Australian jobs data released earlier today could be enough to prop the commodity currency higher for the meantime.
However, a closer look at the components of the employment change report reveals that most of the gains were due to part-time hiring while full-time employment actually tanked by 49.8K.
Perhaps the Aussie could get a boost from sustained risk-taking, which has been bullish for higher-yielding currencies. Keep in mind that Chinese New Year festivities tend to usher in risk-on flows as well.
I’m still more bullish on the euro based on fundamentals, though, as the region has shown consistent improvements in its medium-tier releases. This could keep ECB tightening expectations in play while the central bank has already started trimming its bond purchases.A handful of ECB officials have also spoken about the likelihood of ending their easing program sometime in September, which could keep euro traders on the lookout for rate hike clues next.
On the flip side, the RBA doesn’t seem inclined to hike rates anytime soon as Governor Lowe mentioned in a recent speech that “the Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy.”
With that, I’m waiting for an opportunity to go long EUR/AUD either on a pullback to the channel support around 1.5400-1.5500 or a break past the 1.5800 handle all the way up to the resistance.
How about you? What’s your take on this pair?
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