EURAUD: Bears in full control

Article by ForexTime

The valuation of the EURAUD has plummeted over the previous 48 hours, with the pair declining by around 200 pips. The bearish momentum commenced following the news that EU Foreign Ministers were assembling in Brussels to discuss the possibility of further Russian economic sanctions, while the AUDUSD has reached a two week high after RBA Governor Stevens refrained from talking down the AUD during a speech in support of the Anika Foundation, alongside last night’s CPI data showcasing that Australian inflation levels were increasing at an annualised 3%.

Those thinking they may have lost their chance to join the EURAUD selling train might need to reconsider. Despite the EURAUD recording several fresh yearly lows within the past 48 hours, including the current 1.4256 valuation, if the correct fundamentals align together, further downside moves in the EURAUD remain possible.

It is highly expected that the Reserve Bank of New Zealand (RBNZ) will raise their interest rates for the fourth consecutive month this evening, while it is also anticipated that the subsequent Chinese Manufacturing PMI will indicate growth. Both of these prospects collaborating together should encourage further AUD strength.

Meanwhile, perhaps the largest contributor behind how much additional bearish pressure the EURAUD can suffice before recovering losses, is likely to be determined by what type of reaction Thursday’s EU PMI inspires. June’s PMI fuelled speculation that EU economic activity was slowing down. In fact, IMF Head Christine Lagarde used a speech in Luxembourg to suggest there were clear signs the EU recovery was not robust. Another EU PMI which promotes an unfavorable reaction will add further woes to an already weak EU economic sentiment. This would incorporate further pressure on the EU currency and likely encourage additional EURAUD bearish pressure.

At the time of writing, it looks like this pair is making its way towards the 11th November 2013 low, 1.4225. A downside break below this level would open up the doors for a possible future move to the 8th November 2013 low, 1.4141.

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Whereas a recovery of losses would likely lead to this pair finding resistance situated at 1.4267 and 1.4304.


Written by Jameel Ahmad, Chief Market Analyst at FXTM.

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