EURAUD was trending higher inside a rising channel on its 4-hour time frame and appears to be due for a reversal as price is breaking below support.

The 100 SMA is above the 200 SMA for now to show that the path of least resistance is to the upside or that there’s a chance for the uptrend to resume. However, price is breaking below the 100 SMA dynamic inflection point and is gearing up for a test of the 200 SMA dynamic support next.

A break below this could set off a reversal from the uptrend, although stochastic is already indicating exhaustion among sellers. This oscillator has yet to pull up from the oversold region to reflect a return in buying pressure. RSI has more room to head lower, so selling pressure could stay in play.

The euro is under a lot of downside pressure as a number of cities announced a fresh round of lockdown measures to keep the spread of the coronavirus contained. This would bring in more weakness for business and consumer activity, which could force the ECB to announce more easing measures.

Meanwhile, the Aussie is faring better as Australia moves to lift some lockdown measures, particularly in large cities like Melbourne. This could usher in a recovery for businesses, which would then drive up demand for commodities and riskier assets.

Note that the RBA is scheduled to make its monetary policy statement next week, so more uplifting reports could keep hawkish expectations in play. Earlier today Australia reported stronger than expected quarterly CPI numbers, with the headline figure posting a 1.6% rebound after the earlier 1.9% drop.

Still, any big swings in market sentiment could impact AUD price action, with a return in risk aversion likely to favor the euro over the higher-yielding Aussie.