The pair has been making lower highs and lower lows since December 2014 suggesting that the long term momentum is to the downside. Unless the pair creates a higher low at 1.3725 the weekly picture remains bearish. The 38.2% Fibonacci retracement coincides roughly with the recent pivot high while the 50% level is approximately at level with a pivot candle low (1.4476) from February this year. This suggests to me that the resistance area between 1.4340 and 1.4530 is strong and any near term price advances to the level are likely to be met with selling. Nearest important support levels are at 1.3725 and 1.3190.
With the trend to the downside and the pair at support the Stochastics is now oversold. Should today’s candle close above the Friday’s high we’d have both a price based bull signal and Stochastics closing above its 3 period MA (red line). There could be some resistance around the 1.4076 level as it has acted as a support and resistance in the past. Should the pair move beyond this level the next resistance area would be in the region of upper Bollinger Bands and the upper end of the regression channel.
EURAUD, 60 min
The pair has broken out of the descending regression channel and has since moved above recent reaction highs at 3849 and 3883. Now that EURAUD is retracing back to those levels I expect that there is a good chance market will find support at those levels.
Longer term picture is pointing to the downside as the pair makes lower highs and lower lows. This setup should therefore favour those looking to sell the rallies. Resistance levels between 1.4340 and 1.4530 could work out as short entry level should the market rally there. Short term traders could take advantage of a potential momentum reversal at 1.3849 and 1.3883 with a target at or near 1.4050. Look for momentum reversal signals to confirm the analysis.
Chief Market Analyst
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.