EURAUD tests the 1.535 support again
26 January 2023
One of the strongest currencies on the market right now is the Australian Dollar. Maybe it’s because of the rising prices of commodities, or maybe because of China, which is finally reopening its economy after the battle with Covid. Or maybe the reason is the latest inflation reading, which came yesterday and was much higher than expected. Or maybe all of the above factors contribute to this situation. I do not know but the results can be clearly seen on the chart.
In today’s piece, I will analyze the EURAUD, which in December had a proper buy signal. Surprisingly it was ignored and denied and now, the price is one step from a major signal to sell. As you can see on the chart, in the middle of October, EURAUD climbed back above the 1.535 resistance (orange), which can be considered the most important level for this pair in the past several months. Then, the pair created a sideways trend and eventually broke its resistance at 1.565 (yellow). The breakout was definitely a positive factor but did not lead to the creation of a new bullish trend.
The price started the descent, which accelerated especially in the past few days. The latest structure on the chart is the fully formed Head and Shoulders pattern (blue). What is crucial is that yesterday, EURAUD managed to break the neckline of this pattern (red). Despite that, sellers cannot be fully satisfied yet. We are still above the 1.535 support area (orange), which should be seen as a last bullish stronghold. EURAUD closing a day below the orange area would seal the deal and be a definite signal to go short in the long term. The chances for that are quite high.