The EURAUD currency pair is currently in a consolidation phase following a recent shift in its upward trend, creating an air of anticipation for its next significant move. Notably, the Australian Dollar gained support from China’s central bank, which implemented a cut in bank reserve requirements aimed at stimulating economic growth.
Despite this, the market’s response remained subdued, with a more decisive event on the horizon. Today marks the European Central Bank’s (ECB) interest rate decision, and while expectations lean towards a pause, the real focus lies on the accompanying commentary. There’s a prevailing sentiment that the ECB might counter the market’s expectations for aggressive rate cuts in the first half of the year, potentially injecting some upward momentum into the currency pair as the week draws to a close.
On the 4H chart, the uptrend was broken down, with the currency pair now consolidating between the Fibonacci midpoint at 1.6488 and the 61.8% Fibonacci golden ratio at 1.6572. The 25-SMA (green line) is converging with the 50-SMA (blue line), indicating the market’s neutrality in its sentiment for the currency pair’s direction.
The two SMAs currently underpin the upside, and without a dovish surprise in the interest rate decision later today, the pair could use this support to attempt a breakout at 1.6572. The first barrier to this break lies at the resistance near 1.6603, with a supply zone at 1.6662 becoming a likely destination if this resistance gets cleared. Here, a pivot could occur to retest the breakout’s sustainability, but higher resistance is established at 1.6708 if this fails to materialise.
On the contrary, if the pair breaks below the multiple SMAs, the support of the consolidation range at 1.6488 could be under pressure. A breakdown could lead the pair straight toward 1.6429, where the 100-SMA (orange line) offers support. Once again, a retracement could be triggered at this level, but an additional breakdown brings lower support at 1.6396 and 1.6357 into the spotlight.
The EURAUD currency pair is consolidating as it anticipates the ECB interest rate decision later today. The consolidation range between 1.6488 and 1.6572 could be worth watching, as a break in either direction could materialise.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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