EURAUD has been trending lower on its 1-hour chart, moving inside a descending channel connecting the latest highs and lows. Price just bounced off the channel resistance at the 1.440 major psychological level and could head back to support near 1.4100.
However, the 100 SMA is above the 200 SMA so the path of least resistance is to the upside. This suggests that another test of resistance could be in order or that the pair could push for an upside breakout.
Stochastic is indicating oversold conditions and is turning higher, also suggesting that buyers could take control of price action. A move past the channel resistance could lead to a climb to the next ceiling at the 1.4500-1.4550 area.
Investor confidence in the euro zone has taken a dip after the recent terror attacks in Germany, Turkey and Switzerland. Aside from that, Italy’s banking sector troubles are still in the spotlight as the government might need to bail out its largest banks. To top it off, the ECB’s decision to extend its QE program to December 2017 could further dampen the euro’s gains.
As for the Australian dollar, tensions between China and the US have weighed on the commodity currency, even as the former already returned the latter’s drone it seized from the South China Sea. Expectations of weaker commodity prices and business activity down the line, stemming from the Fed’s tightening moves, are also dragging the higher-yielding currency down.
Data from Australia has been slightly weaker than expected, as the MI leading index printed a flat reading, down from the earlier 0.1% uptick. The RBA minutes expressed some concern about the currency’s gains and its impact on local inflation and export growth.