EURAUD has been trending lower and has recently broken below support around the 1.3800-1.3850 area. Price has dipped to 1.3725 before showing signs of a correction, and applying the Fib tool on the swing high and low on the 1-hour chart shows that the 50% level lines up with the area of interest, which could keep gains in check and push price back to the swing low.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the 200 SMA coincides with the highest Fib, adding to its strength as the line in the sand for this selloff. Stochastic is in overbought territory and looks ready to turn lower, possibly drawing more sellers to the mix.
On the other hand, a break past the 61.8% Fib and 1.3850 area could signal that buyers are putting up a fight and that a larger pullback to the 1.4000 major psychological level could be in the cards.
Economic data from Australia turned out stronger than expected, as the employment change figure came in at 13.5K versus the projected 9.7K increase. This brought the jobless rate down from 5.8% to 5.7%.
In Europe, recent top-tier reports haven’t been so upbeat as the preliminary GDP readings from its top economies turned out below expectations. German ZEW economic sentiment also fell, indicating weaker confidence in growth prospects.
Only the euro zone current account balance is lined up next and there are no other reports due from Australia for the rest of the week. Still, the commodity currency could continue to draw support from risk appetite and China’s improved economic outlook while the euro could be weighed down by financial troubles in Greece and Italy, as well as foreseen risks from France’s elections.
By Kate Curtis from Trader’s Way