EURAUD recently fell below a long-term ascending trend line on its daily chart to signal that a downtrend is about to happen. However, price found support around 1.5300 and is making a correction before resuming the drop.

Applying the Fibonacci retracement tool on the latest swing high and low shows that the 61.8% level lines up with the broken trend line, which might now hold as resistance at 1.5825. The 100 SMA is in line with the 50% retracement level and might also keep gains in check.

Speaking of moving averages, though, it’s worth noting that the 100 SMA is still above the longer-term 200 SMA and is not showing any signs of crossing down. This means that the path of least resistance is still to the upside or that the uptrend is more likely to resume than to reverse.

RSI has some room to climb, which means that the correction could go on for a bit longer before sellers return. Stochastic has climbed up to the overbought zone to reflect bullish exhaustion and a potential return in selling pressure. Turning lower could lead to a drop for EURAUD back to the swing low or lower.

Trade war updates are currently dragging the Aussie lower, though, as weaker business activity from China could dampen demand for their commodity exports. To top it off, the drop in risk appetite on account of these uncertainties are also capping gains for the higher-yielding currency.

Then again, the euro could also have reason to slide as the ECB disappointed bulls in announcing a taper of their QE program instead of a complete halt. ECB head Draghi also remained vague on the timing of rate hikes, possibly to prevent any strong reactions from the currency.

There are no major catalysts from both the euro zone and Australia this week, which suggests that sentiment and counter currency action could be the main drivers.