technical analysis EURAUD

Technical analysis of EURAUD

The Aussie dollar generally held steady in March against most major currencies as the main downtrend has paused but fundamentals remain strong. High prices and Chinese demand for Australian exports, primarily industrial commodities, is a positive factor, but recent retail sales data from Australia have been somewhat weak. This morning’s balance of trade from Australia was also disappointing at around $7.5 billion against the consensus of slightly over $9 billion. Today’s technical analysis of EURAUD looks at the daily chart.

An obvious area of high resistance here is the 100% Fibonacci retracement area around $1.605, while low support might occur around the latest low of $1.525 from late February. The main focus for now though is on interaction with the 50 SMA from Bands.

Technical indicators on EURAUD D1

 

Moving averages continue to give a strong sell signal, with each of the 50, 100 and 200 SMAs successively below slower lines and above the price. The 50 SMA from Bands is likely to be key over the next few days. A confirmed breakthrough above might signal a more extended consolidation or even a change of the trend, while failure to move above it could spur another bout of losses.

Bollinger Bands (50, 0, 2) have remained relatively wide since the last quarter of 2020, but with shrinking now visible on the chart one might expect a decrease in volatility and activity over the next few weeks, except of course around the meeting of the RBA next week. There is no signal of saturation from either Bands or the slow stochastic (15, 5, 5) at the moment, with the latter around 48 very close to neutral.

Price action and Fibonacci

 

The triangle which formed from 24 February has so far held, with the attempted breakout upward on 23 March failing. Pattern-focussed technicians might project a downward breakout from this pattern at the end of next week, but this would of course depend on news from the RBA on Tuesday morning. 24 March’s doji might be considered a fairly strong sell signal from that area, but waiting until a confirmed move above the 50 SMA to sell in seems counterintuitive.

The 100% weekly Fibonacci retracement zone, i.e. full retracement of all the euro’s gains in March last year, seems likely to continue as a key resistance, so immediate attention can be concentrated on the weekly Fibonacci fan. The 50% area would typically be much less important than the 100 SMA, but the close proximity of the two lines might make for a strong resistance at least in the medium term. To the downside the 38.2% area of the fan remains a target area.

Technical analysis of EURAUD: summary

 

The technical picture for euro-Aussie dollar remains generally quite negative, but shrinking Bands and weaker downward momentum suggest that a consolidation is possible over the next few periods. The next key event that could drive stronger movement on this chart is the meeting and subsequent press conference of the Reserve Bank of Australia from 4.30 GMT on Tuesday.

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