The EURAUD currency pair commenced the year on a positive trajectory, currently trading 95 basis points higher in 2024.
This upward momentum extends a trend of consecutive gains over the past two years. The Australian dollar’s recent depreciation serves as a catalyst for the pair’s ascent, fuelled by a decline in inflation rates.
The weakening of the Australian dollar is attributed to subdued inflation, reinforcing market sentiments that interest rates may remain stable. Notably, recent data from the Australian Bureau of Statistics unveiled a decline in consumer price inflation to a near two-year low in November. In November, the monthly Consumer Price Index (CPI) demonstrated an annual growth rate of 4.3%, exhibiting a decrease from October’s 4.9% and falling slightly below the market’s anticipated forecast of 4.4%.
Technical
After a notable downturn in Q4 2023, the EURAUD currency pair is striving for recovery, securing back-to-back weekly gains and poised for a third.
A distinct resistance at 1.64795 emerged following a downturn, while support at 1.61283 materialised amid diminishing downside volumes, catalysing the rebound. The breach of the 61.80% Fibonacci Retracement Golden Ratio signals a momentum-driven surge.
If buyers outweigh sellers, a retest of 1.64795 resistance level seems plausible. However, caution arises as the RSI approaches overbought levels, hinting at a potential reversal. In such a scenario, the 50% level stands as a short-term downside point of interest.
Summary
The EURAUD’s resilient climb amid a weakening Australian dollar and subdued inflation underscores the nuanced interplay of economic forces shaping currency markets. With back-to-back weekly gains and technical indicators signalling a potential sustained rebound, the pair navigates a landscape where market sentiment and technical analysis converge, leaving the 61.80% Golden Ratio as a pivotal level to monitor.
Sources: Australian Bureau of Statistics, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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