EURAUD has been trending lower, moving inside a descending channel on its 4-hour time frame. Price is currently testing the channel support and might be due for a bounce back to the resistance at the 1.5200 major psychological level.
The 100 SMA is below the 200 SMA, which suggests that the downtrend is likely to carry on. In addition, the 100 SMA is near the top of the channel, adding to its strength as a potential resistance level.
Stochastic is indicating oversold conditions so sellers might need to take a break and let buyers take over. Similarly, RSI is in the oversold area and is starting to turn higher, possibly drawing buyers back in the game.
Event risks for this setup include the EU referendum, as this could have repercussions on the euro zone economy as well. So far, the latest Brexit polls are showing a slight lead in favor of staying in the EU but the actual results are still too close to call.
The euro is currently being weighed down by ECB Governor Draghi’s remarks saying that further stimulus is in the pipeline. This caught many traders by surprise, as many were simply expecting him to say that they have enough monetary policy tools at their disposal if needed.
As for the Aussie, the RBA minutes didn’t seem so dovish so the currency managed to advance. Australia’s MI leading index is up for release next and a figure higher than the previous 0.2% reading could mean more gains.
By Kate Curtis from Trader’s Way