EURAUD has been selling off recently but could be due for a bounce as price is nearing the bottom of the range on its 1-hour time frame. If the bottom of the range at the 1.4550 minor psychological support keeps losses in check, the pair could head back up to the top of the range at 1.4750 or at least until the middle around 1.4650.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, the gap between the moving averages is narrowing so a downward crossover might be due, drawing more sellers to the mix and possibly triggering a downside break of support. If that happens, the pair could fall by an additional 200 pips or the same height as the rectangle formation.
Stochastic is already indicating oversold conditions so a bounce could be in order. The oscillator has yet to move out of the oversold region before indicating a return in buying momentum.
Economic data from the euro zone was stronger than expected in recent sessions. The region’s ZEW economic sentiment index rose from 5.4 to 12.3 this month while the German ZEW index was up from 0.5 to 6.2, outpacing the consensus at 4.2.
As for Australia, its Westpac consumer sentiment index posted a strong 1.1% increase, a stronger pace of improvement compared to the earlier 0.3% uptick. An upbeat report from Moody’s on the strength of the Australian economy is keeping the Aussie supported during the Asian session.
There are no other reports due from Australia for the rest of the day while the euro zone has its industrial production report and the French final CPI reading lined up.
By Kate Curtis from Trader’s Way