EUR/AUD Heads Towards Critical Support As Uptrend Loses Steam
Ali Mortazavi | Jul 04, 2022 06:51AM ET
EUR/AUD is trading within a bullish channel after falling to a five-year low at 1.43173, followed by an upside corrective wave. The pair has already hit the 200-day exponential moving average, which lines up with a solid resistance area of 1.530. As seen on the daily chart, This area had previously posed a barrier to the upward rally in mid-March, May, and late June, and it appears that it has done so again this time. In addition, the price is in the upper half of the Bollinger Bands, which indicates a bullish market.
For the time being, EUR/AUD is trading between the 1.530 resistance and the 1.5060 support. The upcoming direction of the market will be determined by a break on either side of this range. On Monday, the price dipped on the back of the superiority of sellers. If intensifying bearish momentum persists, the pair can continue to fall to the previous price floor at 1.5060. This area is located at the confluence of the 20-day SMA and 50-day EMA, which also covers the lower edge of the ascending channel, making it a critical support area.
If sellers overcome this obstacle, a double-top reversal pattern will form, and the price will enter the lower half of the Bollinger Bands. An M reversal pattern emerges after a relative lower top was made inside the bands on Friday, as the previous relative high was outside the bands on Jun. 23. It signals a weakening upward momentum and the possibility of a bearish reversal. The convergence of the Bollinger bands also confirms that positive momentum is running out of steam in the short term.
A downside break of the ascending channel could send the price to the lower band around the previous price floor at 1.47662.
Otherwise, if 1.5060 holds support, buyers will regain control. But continuing the upward trend will require breaking the strong resistance zone of 1.530. Momentum Oscillators indicate a weakening of buying forces but have not yet provided any indication that sellers are capable of reversing the trend. The RSI has been back and forth in buying territory attached to the neutral zone. The momentum is above the 100-threshold but moving very gently. The positive MACD bars have also shortened, falling below the signal line.
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