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I’ve got my eyes on this simple Fib retracement play on the 1-hour chart of EUR/AUD as the pair approaches an area of interest.

EUR/AUD Trade Idea

EUR/AUD 1-hour Forex Chart
EUR/AUD 1-hour Forex Chart

This pair recently busted through the resistance around the 1.5450 minor psychological mark then climbed to a high of 1.5600 before retreating.

Are buyers about to return around these correction levels?

The Fibonacci retracement tool shows that EUR/AUD is already sitting right on the 38.2% level, which lines up with the 100 SMA dynamic support.

This moving average is above the 200 SMA to signal that the floor is more likely to hold than to break.

Stochastic has already reached the oversold region but has yet to turn higher to confirm that buyers are ready to take over. A deeper pullback might still be possible, taking the pair down to the 50% Fib that coincides with the broken resistance and the 200 SMA dynamic inflection point.

I’m counting on euro bulls to defend support levels since leading indicators are hinting at stronger economic performance for the region.

In particular, the latest round of PMI readings reflected a faster pace of expansion in the manufacturing industries of Germany and France. The upcoming release of the German Ifo business climate index might highlight this outlook, as the reading is slated to improve from 92.4 to 93.1.

Meanwhile, the blockage in the Suez Canal could delay shipments of goods and raw materials for much longer, which could be bearish for the commodity-driven Australian dollar.

If that’s the case, EUR/AUD could recover to the swing high soon and possibly even bust higher if risk aversion comes back in play.

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