EURAUD could be due for a downtrend as a head and shoulders pattern has formed on its 4-hour chart. Price has yet to break below the neckline at 1.5900 to confirm the potential drop.
The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. This means that the uptrend is more likely to resume than reverse. Also, stochastic is indicating oversold conditions and is pulling up to suggest that buyers could regain control.
Easing trade tensions between the US and China could revive demand for the Aussie as traders are no longer worried about falling commodities and risk-off flows. Data from Australia has been weaker than expected today, though, as the Westpac consumer sentiment index printed a 0.6% drop.
Then again, data from the euro zone hasn’t been all that impressive as French and Italian industrial production both missed estimates. ECB head Draghi has a speech coming up today and cautious remarks could continue to weigh on the shared currency.
Later in the week, China will be releasing its trade balance and this would likely impact AUD action. Apart from that, any headlines related to trade talks could also prove positive for the Aussie.
By Kate Curtis from Trader’s Way
