Technical Sentiment: Bullish
Key Takeaways
• EUR/AUD broke a triangle formation to the upside;
• Price closed above the 200-Day Moving average;
• EUR/AUD bullish towards 1.4490 / 1.5100.
After a prolonged downtrend, the Euro appears ready to recover more ground against the Australian Dollar. The pair finally managed to break the downtrend configuration by establishing a Higher Low (1.4715) and a Higher High (1.4928).
Technical Analysis
Half-way through the European session, EUR/AUD is trading around the 1.4900 handle. The triangle breakout, due to its size, led to the formation of a Bullish Engulfing Bar on the Daily timeframe. This price action pattern has not been confirmed yet, as price never broke above Wednesday’s high at 1.4928.
Since the pair has not reached any major resistance levels, a continuation towards the upside is likely in the coming sessions. Before moving higher, EUR/AUD can still correct from the current levels in order to test the support areas and form a fresh Higher Low.
Support begins at 1.4837, marked by the 200-Day Moving Average and the previous resistance area. A second support area is located around the 1.4790, where the 50 and 100 Simple Moving Averages from the 4H timeframe meet the old triangle resistance. The third support is at 1.4715 – if price breaks below this level all bullish scenarios will be invalidated.
Towards the upside, for a bullish continuation above 1.4928, EUR/AUD has immediate targets at 1.4955 and more importantly at 1.4490. The latter represents a strong resistance confluence between:
– the 4H 200 Simple Moving Average;
– the 38.2% Fibonacci Retracement between 1.5536 down to 1.4653;
– February 2013 Low.
The third resistance, just as valid, is the Fibonacci confluence around 1.5100, where the 50-Day Moving Average is also located.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
