EURAUD is trending lower on its 4-hour chart as its highs can be connected by a descending trend line since December last year. Price is currently testing this resistance and might be due for a move back to the swing low next.

The trend line happens to line up with the 61.8% Fibonacci retracement level around 1.5688 and the 200 SMA dynamic inflection point. A reversal candlestick has formed at this level and price might be headed back to the 1.5240 swing low from here.

On the subject of moving averages, the 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that resistance levels are more likely to hold than to break.

Stochastic is also indicating overbought conditions or exhaustion among buyers, and turning lower could confirm that sellers are taking over. RSI looks ready to move south from the overbought zone to reflect a return in bearish momentum as well.

There are no major reports due from both the euro zone and Australian economy for the rest of the week, although the latter has been doing much better in terms of handling the pandemic. There are still plenty of issues in the euro zone’s vaccination rollout, which could potentially delay a return to normal business conditions.

Risk appetite could also favor the higher-yielding Australian dollar as traders continue to hold out for potential government and central bank stimulus. This might be enough to keep consumer activity and business demand supported, which could be bullish for commodities.

Earlier today, however, China reported a weaker than expected Caixin manufacturing PMI and this could be negative for Australia’s raw material commodities. The index fell from 51.5 to 50.9 in February, reflecting a slower pace of expansion. Prior to this, the government figures also pointed to slower manufacturing and services activity for the past month.