The AUD has been relentlessly gathering momentum over the past few weeks and it doesn’t appear to be slowing. Whilst the EUR/AUD is currently battling with a particularly robust long-term support, breaking out here could send the pair even lower. Additionally, the impending ECB Minimum Bid Rate decision could be the spark needed to see the EUR/AUD burn through the current support.
Looking at the daily chart, a nascent impulse wave pattern is forming and a break in support at 1.4483 could see the second leg complete. In this event, the completion of the pattern could result in the pair plummeting down to 1.3986 before it finds support. Furthermore, Fibonacci retracement demonstrates that the current support is at the 100% retracement level of a previous downswing. In addition, the new bottom at 1.3986 is the 127.2% retracement level which should provide some stiff support should the impulse waves complete.
EMA indicators and the ADX oscillator are also signalling that the EUR/AUD is poised to continue to tumble. The 12, 20, and 100 period EMA’s on both the daily chart and the H4 chart are in agreement that this pair is strongly bearish. Supporting the EMA conclusions is the ADX reading, the oscillator is rapidly approaching the pivotal 50 mark which infers the voracity of the fall should continue. However, it is worth noting how oversold the Stochastics are for the EUR/AUD at present. As a result of this, there could be some additional buying action at the current support which serves to impede the pair from breaking through.
On the fundamental front, the ECB Minimum Bid Rate decision could provide the additional momentum to break support. As with most rate decisions, the Minimum Bid Rate decision causes a significant degree of volatility for the euro. As a result, in the lead up to the announcement the volatility could outweigh the buoying effect of the oversold stochastic oscillator. In this event, the pair should begin the plunge to the 1.3986 level and complete the pattern.
Ultimately, the consistent strengthening of the AUD should be evidence enough to see the downside potential of the EUR/AUD. However, the current chart pattern, EMA indicators, and ADX oscillator all confirm the general market sentiment towards the AUD. Moving ahead, this pair may need some additional assistance from a fundamental result release to break support but should eventually reach a new bottom at 1.3986.
