After printing a Lower High (LH) on daily chart, EUR/AUD is poised for a major slide up to 1.5007. The pair was closed yesterday in negative territory at 1.5383. At the time of writing in Asian session spot is being traded at 1.5407, around 100 pips down from previous wave’s swing high. Here appears a classic opportunity to open a short position as shown below.
Selling at current levels with a stop at 1.5506 may yield tempting 400 pips gain (RR 1:4) because the pair should print a Lower Low (LL) according to typical behavior of candlestick waves (swing analysis).
We have two major support levels in road to 1.5007 where EUR/AUD may find some buyers, those are 1.5231, 23% fib level and 55 Daily Moving Average (DMA) which is currently 1.5155. In addition a triple confluence of moving averages can also be noted around 1.5295-1.5320 at four hour timeframe. On upside, the pair shall find a strong resistance at 1.5500, near previous wave’s swing high. A break above this level would turn our bias into bullish.
If we talk about macroeconomic situation, we have some crucial economic reports due in Euro basket. Germany’s ZEW survey for the month of January is scheduled for release later in London session today; economists have predicted better reading this time around. Then tomorrow in Asian session investors will be analyzing Australia’s inflation report for fourth quarter of last year coupled with some other important economic reports. Positive developments in Australian economy will be seen as negative by EUR/AUD traders that could aggravate the downside risk. Eurozone’s market manufacturing PMI and Germany’s constitutional court ruling is also due later this week which might have significant impact on EUR/AUD price.
Earlier today Germany’s Producer Price Index (PPI) reports posted better than expected readings that helped lifting EUR/AUD and other euro crosses.