The euro fell to show signs of continuation in a downtrend that has been pretty brutal against the Australian dollar.
The 50-day EMA sits all the way at the 1.66 level and quite frankly we are nowhere near there, so I think we've got a situation where traders are looking for a selling opportunity every time this pair rallies.
That does make a certain amount of sense considering that the Reserve Bank of Australia has raised rates in the last year while the European Central Bank hesitates to do so. The commodities boom of course will help Australia as well and at the same time you have to keep in mind that the European Union has to worry about such basic things as energy supply.
Potential for Continued Drastic Downside
If that continues to be the scenario, then we could have a significant situation where the continuation could get quite drastic. We have a massive H pattern forming and breaking below the 1.61 level would really open up the floodgates for the EUR/AUD pair.
On the other hand, if we were to turn around and recapture the 1.68 level, it could be a bit of a trend change. That's not really what I'm looking to see happen, but it is something that's possible I suppose. All things being equal, it looks like we are somewhat range-bound with a downward bias so short-term traders will be looking for rallies that they can really sell into.
Top Regulated Brokers
The market remains very noisy, but I think ultimately there is a lot of questioning now when it comes to whether or not the European Union will have massive problems going forward. After all, the markets continue to favor a lot of commodities and therefore you already have the idea that Australia will continue to gain at others' expense.
Add to that the interest rate differential; that makes for a scenario that we should see continued pressure. That being said, if we do get a major shock to the system again, you could have a situation where the Australian dollar is shunned, but as things stand right now, it doesn't really look like a major problem and as a result, I believe this is a situation where you just look for rallies that show signs of exhaustion that you can jump on.
Ready to trade our Forex daily analysis and predictions? Check out the largest forex brokers in Australia worth using.