Yesterday marked a big day for EURAUD as the pair closed below a trend line that has been in place since late April. I mentioned this level last week as well as in the weekend commentary, noting that bullish price action in this area could produce a favorable buying opportunity.
However in that same commentary I also mentioned that a daily close below the level would offer an opportunity to watch for bearish price action; yesterday’s session appears to have set that opportunity into motion.
Adding confluence to this idea is yesterday’s close below the 1.5457 handle, a level that has been in place since 2007. The combination of these two breaks should give anyone looking to sell this pair a bit more confidence in their bias.
Do note, however, that prices are getting a bit overextended at the moment, which is reason to suspect that a reversion to the mean could be in order before we see the next leg down. As such it’s important to wait for bearish price action on a retest of the broken level as new resistance before considering a short entry.
Also note that we have the Australia NAB business confidence survey results due out later today (October 12th) at 8:30pm EST, so expect an increase in volatility around this time.
Summary: Watch for bearish price action on a retest of 1.5457 as new resistance. Key support comes in at 1.5140 and 1.4770. Alternatively, a daily close back above 1.5457 would negate the bearish bias and expose key resistance at 1.5775.