EUR/AUD tumbled on Friday, breaking below the key crossroads of the 1.6180 support (now turned into resistance) and the short-term uptrend line drawn from the low of the 3rd of December. That said, the slide was stopped near the psychological round number of 1.6000 and today, the rate rebounded somewhat. After the spike due to last week’s “flash crash”, the pair has been on a slide mode, with the aforementioned break shifting the bias to the downside, in our view.
If the bears are strong enough to drive the battle below the key hurdle of 1.6000, we would expect the slide to continue towards the 1.5885 line, marked by the inside swing peak of the 9th of December, or the 1.5855 level, which is the high of the 18th of the month. However, before the next negative leg, we see the case for EUR/AUD to rebound a bit more, perhaps to challenge the 1.6180 zone as a resistance this time.
Our view for some further corrective rebound is supported by our short-term momentum indicators. The RSI rebounded from near its 30 line and now points up, while the MACD, although below both its zero and trigger lines, shows signs that it could start bottoming.
In order to start looking at higher levels again, we would like to see a clear and decisive move back above 1.6400, which is near the high of the 3rd of January. Such a break would confirm the rate’s return above the pre-mentioned short-term uptrend line and may encourage the bulls to put the 1.6590 zone on their radars. That hurdle is marked by the highest point of the August 2015 rally, which was hit on the 24th of that month. Another move above 1.6590 could see scope for extensions towards the peak reached due to last week’s “flash crash”, at around 1.6770.
