EURAUD has been forming higher lows on its 4-hour chart, creating a rising trend line and reflecting an ongoing uptrend. The pair seems to be making a correction from its latest rally and using the Fibonacci retracement tool shows that the 50% level lines up with the 100 SMA while the 61.8% level coincides with the trend line and 200 SMA.
In addition, the 1.4300 major psychological level and area of interest is around the 50% to 61.8% Fibonacci retracement levels, which might act as strong support. The 100 SMA is still above the 200 SMA, which suggests that the uptrend could carry on.
RSI is moving down, indicating that the correction is still underway. However, stochastic is on the way, which means that buying pressure could be present and allow the 38.2% Fib to hold as support. A move higher could lead to a test of the previous highs around 1.4750 and possibly a rally beyond this area.
Event risks for this setup include the Greek debt negotiations, which might spark huge moves among euro pairs once a decisive conclusion has been reached. If Greece is unable to agree to an economic reform plan that will allow them to unlock the next set of funds and avoid a default, the euro could be in for a sharp selloff and lead EURAUD to break below the trend line.
On the other hand, a last-minute deal between the creditors and the Greek government could be bullish for the euro. This will allow the debt-ridden nation to stay in the euro zone and clean up its finances, not putting the stability of the shared currency in question.
Earlier today, the RBA released the minutes of its latest policy meeting and confirmed that they would keep monetary policy accommodative. They also stressed that the Aussie needs to depreciate further and that this would be a likely scenario given the recent declines in commodity prices.
By Kate Curtis from Trader’s Way