EUR/AUD has been in a steep slide since Sept. 30, but the technical reversal was confirmed after the dip below 1.5910, the neckline of a head and shoulders reversal pattern.
Yesterday, the pair hit support slightly above 1.5422 and rebounded somewhat, but we will stay negative with no signs that the bulls could take full charge soon.
A test at 1.5422, a support zone marked by April 15 and May 10's lows, looms. After which, the bears could take a break and allow a corrective rebound.
If the recovery stays limited below 1.5660, we would expect another round of selling. A break below 1.5422 could open the path towards the low of Feb. 25, at 1.5250.
Bearish Case
Shifting attention to our short-term oscillators, we see that the RSI lies below 30, while the MACD runs below both its zero and trigger lines. Both indicators detect downside speed and support the notion for further declines.
However, the RSI, even within its below-30 zone, ticked up, indicating that the pair could correct higher after it tests the 1.5422 barrier.
Bullish Case
To abandon the bearish case, we would like to see the pair returning above the neckline at 1.5910. The bulls could charge towards the right shoulder of the H&S pattern, at 1.6230. The pair could end up higher as a result, at around 1.6433.
