EUR/AUD Headed to 1.45

EUR/AUD Headed to 1.45

EUR/AUD Headed to 1.45

Both the ECB and the RBA have monetary policy announcements this week. The Euro has fallen sharply but given the uncertainty surrounding exactly what actions the central bank will take (from extended asset purchases to deposit rate cuts to two-tiered rates and more), there’s still plenty of room to the downside for euro. At bare minimum we believe 1.05 will be tested and likely broken which will take all of the euro pairs lower. In contrast, RBA officials have been surprisingly optimistic and chances are, these views will be reinforced by the monetary policy statement and this week’s GDP report. For these reasons, we like being short EUR/AUD ahead of these 2 monetary policy announcements.

Technically EUR/AUD is trading below its 50, 100 and 200-day SMA with the 2 former moving averages about to cross to the downside a negative signal for the currency. Today’s move has taken EUR/AUD below the 38.2% Fibonacci retracement of the 2012 to 2015 rally. At this stage there is no major support for EUR/AUD until 1.45, a psychologically significant level. Resistance is at the Fib level but more importantly the 200-day SMA near 1.48.

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