EURAUD recorded a stunning rally over the last five weeks, while on Tuesday it completed a fresh three-year high of 1.6350. This week, though, the pair is on the backfoot and the technical indicators suggest that the market could ease a little bit in the short-term.
The MACD is currently increasing negative momentum as it falls towards its trigger line, hinting that the next move in prices could be on the downside rather than on the upside. The bearish signals are even stronger from the stochastic oscillator as the blue % K line has finally formed a bearish cross with the red %D line and both are heading lower.
Should prices decline, immediate support could be found around the 1.6135, yesterday’s low. A close below this level could endorse the scenario for negative pressure and could challenge the 20- and then the 40-simple moving average (SMA) at 1.6046 and 1.5871 respectively in the daily chart. If there is a drop below these levels, the next stop could be at the 23.6% Fibonacci retracement level of the upleg from 1.3625 to 1.6350, near 1.5710.
However, if the pair continues the previous weeks’ aggressive bullish rally, immediate resistance could be met at the 1.6350 high. Above this level, the next barrier for investors to have in mind is the 1.6590, identified by the top on August 2015.
In the medium term, the bullish outlook remains intact, with the moving averages all pointing upwards. However, should prices decline towards the SMAs, this would risk shifting the short-term picture to bearish.
