Technical Sentiment: Bullish
Key Takeaways
The European session has seen traders buy into the weakness shown during the Asian session. EUR/AUD trend configuration remains bullish, with the higher swing low at 1.4855 intact and a small Fibonacci bounce. A higher swing high is now expected above 1.4944, preferably as high as 1.4990.
Technical Analysis
After last week’s bullish triangle breakout, the only higher swing low EUR/AUD formed was the one at 1.4855. This level also coincides with Fibonacci 38.2% between 1.4714 and 1.4944; consequently the bullish bounce reduced the probability of a deeper correction for now.
Towards the upside EUR/AUD will immediately confront the 200 Simple Moving Average on the 4H timeframe, along with April’s high in the 1.4955/65 region.
The secondary resistance area is just below the 1.5000 handle, a confluence between Fibonacci 38.2% from 1.5536 down to 1.4653 and December 2013 Low. A strong break above this region may even expose 1.5100, albeit Daily Stochastic is in overbought territory and another break along the way may be necessary.
For the current landscape, the bullish outlook is only going to be invalidated if EUR/AUD drops below 1.4856. Bearish rejections from the resistance levels or off the 200 Simple Moving Average will aim directly at this support level, but there is no point in aiming for lower levels while the higher swing low remains intact. The same logic that was applied for the two higher lows at 1.4715 should be used in this situation as well.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets