EURAUD has been declining on its 4-hour chart but a reversal pattern has formed, signaling a potential uptrend. Price has failed in its last two attempts to break below the 1.4500 major psychological support, creating a double bottom formation with the neckline around 1.4900.
The pair is on its way to test this resistance area and a break higher could confirm the longer-term uptrend, which might last by 400 pips or the same height as the chart formation. If this neckline keeps gains in check, though, EURAUD could head back to support at the 1.4500 mark.
The 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages is narrowing so an upward crossover might be in the cards. Stochastic is in the overbought zone but has yet to turn lower to indicate a return in selling pressure.
Economic data from Australia has been stronger than expected, as the July jobs report showed a 26.2K gain in hiring versus the projected 10.2K increase. Aside from that, the previous reading was upgraded from 7.9K to 10.8K while the jobless rate fell from 5.8% to 5.7%.
Euro zone data has been mixed, with the final CPI readings in line with expectations and ZEW economic sentiment indicators showing improvements. There are no major reports from both the euro zone and Australia today, which suggests that market sentiment could play a huge factor in price action.
By Kate Curtis from Trader’s Way