EURAUD has completed a textbook head and shoulders reversal pattern on the 4-hour time frame, signaling that the previous uptrend could be giving way to a more sustained selloff.

The pair has broken decisively below the neckline support around 1.7800, confirming the bearish pattern and opening the door for a measured move decline.

The head and shoulders formation suggests a target around 1.7550-1.7600 based on the height of the pattern projected from the neckline break. Price is currently trading near 1.7716, having found some temporary support after the initial breakdown, but this could merely be a pullback before the next leg lower.

The Fibonacci retracement tool shows potential resistance levels where sellers could emerge during any corrective bounce. The 38.2% retracement of the recent decline sits around 1.7750, while the 50% level coincides with the broken neckline near 1.7800. A larger correction could reach the 61.8% Fib at 1.7830, which could serve as the line in the sand for the bearish scenario.

Technical indicators are aligned with the bearish outlook, as the 100 SMA appears to be crossing below the 200 SMA, confirming that the path of least resistance is to the downside. Both moving averages could now act as dynamic resistance on any bounce attempts.

Stochastic has moved out of overbought territory and is heading south, indicating that selling pressure is building momentum. The oscillator has plenty of room to decline before reaching oversold levels, suggesting the correction could extend further.

RSI is also pointing lower from the midpoint, reflecting weakening bullish momentum and supporting the case for additional downside. The oscillator would need to reclaim the 50 level to suggest any meaningful recovery.

EURAUD continues to take cues from global trade headlines, particularly ongoing negotiations about a trade deal with the US. Backlash over the framework agreed upon over the weekend has been weighing on the shared currency ahead of the August 1 deadline.