Technical Sentiment: Bearish

Key Takeaways

• Australian Dollar holds steady across the board as quarterly Producer Price Index came in line with the consensus at 0.2%;
• Euro dragged lower by worse-than-expected German Retail Sales plunge of -3.2%;
• Traders target the next area of interest at 1.4146, followed by 1.4048.

This week EUR/AUD continued its recent losing streak, expanding potential for future losses after two major support levels at 1.4358 and 1.4312 failed to keep sellers in check.

Technical Analysis

EUR/AUD is on track to close in the red for the second consecutive week. Based on the current technical landscape, we expect additional bearish price action during first weeks of November. Previous higher lows at 1.4312 & 1.4358, strengthened by 50-Day SMA and 38.2% Fibonacci Retracement between 1.38 and 1.47, have now been invalidated. This is a strong indication that EUR/USD is about to complete a deeper correction on September’s uptrend.

Despite strong oversold conditions, EUR/AUD is unlikely to shed any of this bearish pressure due to unexpected rallies. Even if the pair does rally, previous support levels have been confirmed as resistance levels when tested from bellow, providing precise stop loss exits. Immediate resistance (a confirmed price pivot line) is located at 1.4312. While trading below this level, selling pressure will dominate the pair. The main support target is 1.4145, confluence formed between an old yearly pivot area and 61.8% Fibonacci retracement. If the downtrend accelerates, 1.4048 could also become a viable target.

On a return above 1.4312, EUR/AUD would face plenty of resistance levels every other 50 pips, making a recovery scenario, even in the short-term, highly unlikely.

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Prepared by Alex, Currency Strategist at Capital Trust Markets