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Will EUR/AUD Break 1.50?
1.50 is a psychologically significant resistance level in EUR/AUD and over the past week the currency pair has quietly tested this level. So far it has struggled to break through due to the lack of market moving Eurozone and Australian data but that could change in the coming week with the ECB and RBA rate decisions. The euro has been performing well due in part to the weakness of the U.S. dollar but data has also been good, reducing the possibility of unconventional stimulus from the ECB. The increase in Eurozone consumer prices this week should ease the central bank’s concerns about low inflation while healthier economic reports from Spain and Germany will fuel expectations for a stronger recovery. At the same time, softer manufacturing data and lower oil prices is putting downside pressure on the Australian dollar. The big question in the coming week is how uncomfortable the ECB is with the level of the currency. We know that they are not happy with its recent ascent but will Mario Draghi say point blank at next week’s press conference that the euro is too strong and he wants to see it lower? If he does, it would prevent EUR/AUD from sustaining a break above 1.50. However if he doesn’t then it could clear sailing for the currency. Tonight we have Australia producer prices scheduled for release. If PPI growth falls short of expectations like CPI, EUR/AUD could test 1.50 but PPI is not significant enough for EUR/AUD to sustain a move above this key level.
While 1.50 is a psychologically significant resistance level in EUR/AUD, the real level for the currency pair to break is the April high of 1.5022. Above this point there is no major resistance until 1.52. Should the upside momentum in EUR/AUD fade and the currency starts to trend lower, support will be found at the April low of 1.4655.