EURAUD In Breakout Pattern?
Following the breakout above the bearish channel which has framed the sell off from Q3 2020 highs, EURAUD has yet to break above the 1.5671 level. With a rising trend line off the year’s lows supporting the correction, price has formed an ascending triangle pattern against the 1.5671 level posing the potential for a breakout towards the 1.5931 level next.
Fundamentally, this is an interesting trade as both currencies had been higher against the Dollar, reversed and are now recovering. For now, EUR remains weaker against the Dollar, however, this position could soon shift with EURUSD seeing a topside channel break, while AUDUSD is potentially at the right shoulder of a large head and shoulders pattern suggesting the room for a reversal. If this plays out, expect a quick move up to 1.5931. Alternatively, if this view doesn’t play out, traders can look for a downside break of the rising trend line to target a move back to 1.5264.
Key Data to Watch
The RBA meeting next week will be the key catalyst for this move. If the RBA takes a more optimistic tone on the economy we are likely to see EURAUD sink like a stone. However, if the RBA take a more cautious approach and downplays the strength in the economy, this could allow EURAUD to pop higher.
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