EUR/AUD Testing Ascending Triangle Support

EURAUD has formed higher lows and found resistance around the 1.5850 minor psychological mark, creating an ascending triangle on its hourly chart.

The 100 SMA just crossed above the 200 SMA to indicate that the path of least resistance is to the upside or that support is more likely to hold than to break. However, price has dipped below both moving averages as an early indicator of selling pressure.

A break below the triangle bottom around the 1.5750 minor psychological level could set off a drop that’s the same height as the chart pattern or around 250 pips.

Stochastic is already indicating oversold conditions, though, or exhaustion among sellers. Turning higher could signal that buyers are returning and could push for another test of resistance. RSI is moving sideways but is also close to the oversold area.

There are no major reports due from the eurozone for the week while Australia has its jobs report coming up. After posting an impressive 366.1K jump in hiring for November, employment could slow to a 60K gain in December.

A stronger than expected read could confirm the positive momentum in the jobs market, which would be reassuring for the RBA and Aussie bulls. On the other hand, a smaller gain or a surprise drop could dash rate hike hopes and bring losses for the currency.

Risk appetite would likely push the Aussie around throughout the week as well, with higher-yielding assets currently drawing support from optimism for the global economy. China recently posted a few upside surprises in data points while policymakers have been noting that their economies could weather the latest Omicron concerns.

A return in risk-off flows, however, might wind up favoring the lower-yielding euro versus the Aussie. This could be spurred by headlines suggesting that the pandemic continues to worsen and weigh on global growth.

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