With both the Caixin Services PMI and the Caixin Composite PMI for China coming in worse than expected earlier today, the Australian Dollar was on its heels on most the day. Combine China’s numbers with a stronger Markit Services and Composite PMIs from many European countries and with the EU as a whole, and we get a strong case for a move higher in EUR/AUD. However, did the pair move too far too fast?
In just two days, EUR/AUD pared losses that took 8 days in the making, over a 1% move from yesterday’s lows at 1.5964 to today’s high at 1.6131. Today though, EUR/AUD came to a screeching halt at the 200 Day moving average near 1.6160 and the 50% retracement level of the move from the highs on December 16th to Friday’s lows.
Source: Tradingview, City Index
On a 240-minute chart, EUR/AUD retraced to strong horizontal support, at 1.6150. The RSI has also moved into overbought territory (although it has not turned lower). This suggests the pair may be ready for some type of short-term pullback.
Source: Tradingview, City Index
EUR/AUD bears will look to short near 1.6150 with stops above. Resistance comes across at the 61.8% Fibonacci retracement level of the previous mentioned timeframe near 1.6180 (see daily chart), the psychological big figure at 1.6200 and the downward sloping trendline on the 240-minute timeframe near 1.6275. Bulls will look for a retest of horizontal support near 1.6040 to buy the pair. Support below at prior lows of 1.5965 and 1.5905.
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