EURAUD has been trending higher on the 4-hour time frame and price looks ready to make another test of the uptrend line connecting the recent lows. Price could draw support around the 1.5000 to 1.5100 area, which lines up with the trend line and former resistance level.
In addition, the trend line coincides with the moving averages, which have held as dynamic support areas in the past. The 100 SMA is above the 200 SMA, confirming that the uptrend could carry on.
Stochastic has just reached the oversold area, suggesting that a bounce might take place soon, but the oscillator has yet to turn higher. Meanwhile, RSI is still on the move down, which means that there may be enough selling pressure left to trigger an actual test of the uptrend line.
The euro has been climbing ever since the Greek debt drama reached a resolution and bailout talks are moving forward. Data from the euro zone hasn’t been so impressive but traders are still banking on the improved sentiment in the region.
On the other hand, the Aussie has been under heavily selling pressure when gold prices have been falling last week and early this week. The Australian economy could be faced with weaker mining revenue and investment if gold continues to drop, as this would also weigh on iron ore prices and other commodities.
Apart from that, the recent selloff in Chinese equities earlier this week shows that Australia’s major trade partner isn’t out of the woods yet. It seems that the government and central bank intervention has only stemmed the decline for a few weeks but the overall outlook is looking grim. Further declines could mean weak demand for Australia’s raw material exports, which might then weigh on the country’s growth.
By Kate Curtis from Trader’s Way