The Aussie dollar has continued to strengthen against the euro this morning GMT after strong employment data from Australia. November’s employment change at 90,000 beat the consensus by half and unemployment also declined unexpectedly. Meanwhile the general narrative of ‘risk on’ in markets continues, boosting the Aussie dollar and other trade-sensitive instruments. Today’s technical analysis of EURAUD looks at the daily chart.
High resistance on this chart is the latest high around A$1.682. Low support appears to be the psychological area of A$1.60 which price is currently testing. Areas from moving averages are also in view for if there might be a bounce next week.
Moving averages have returned to yielding a sell signal, with all three of the 50, 100 and 200 SMAs successively below slower lines and above the price. The 50 SMA has recently death crossed the 100. The relatively small spaces between the three lines puts the value area around A$1.635 into focus in the runup to Christmas.
There is currently no sign of oversold from Bollinger Bands (50, 0, 2) but the slow stochastic (15, 5, 5) at 11 is clearly within the trigger zone of selling saturation. This situation might prevail for some time, but equally traders should prepare for the possibility of a bounce given the importance of the current area. Volume has remained somewhat lower than the average for November and early December this week, but this isn’t surprising with holidays approaching at the end of next week.
The three crows from Wednesday to Friday last week would traditionally be taken as a very strong sell signal on this timeframe, indicating an ongoing fundamental downward movement. The current period also appears to be forming a downward engulfing pattern, but confirmation should be sought from the completion of today’s trading. This morning’s A$1.60058 was an annual low and the first clear new low made by EURAUD since May of this year.
The daily Fibonacci fan remains in focus this week as price continues to follow the 38.2% area downward. However, the key zone from Fibonacci is the 100% daily retracement area, i.e. full retracement of all the euro’s gains in the first quarter of 2020 as covid first drove markets to crash. A break below this area which coincides with psychological support would probably see further significant losses.
Overall the technical picture for euro-Aussie dollar remains negative and more losses seem possible into the end of the year. The counterpoint to this is the importance of A$1.60 as a psychological support, coinciding with the 100% weekly Fibonacci retracement. One possible scenario is a short-term bounce from the current area amid low volume, followed by a retest of this zone in the new year.
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