Since February 2017, the EURAUD has been in an uptrend. The higher lows and higher highs tell us that much.
However, Wednesday’s close punched a sizable hole in that narrative. Not only did sellers take out the 1.5770 horizontal level, but they also took out the trend line that extends from the 2017 low.
Yesterday’s breakdown leaves us with a confluence of resistance in the 1.5770 region. As such, I suspect any retest of this area as new resistance will attract an influx of selling pressure.
One reason I like the EURAUD here has to do more with the well defined horizontal levels than anything else. In addition to 1.5770, market participants have carved other obvious levels such as 1.5620 and 1.5480.
I always like to see a market respecting key areas before considering an entry. Breakouts from distinct technical patterns can be profitable, but only if you can identify probable targets.
In the case of the EURAUD, the first target comes in at 1.5620. Of course, that depends on whether or not sellers can successfully defend the confluence of resistance at 1.5770.
As long as the 1.5770 area holds as new resistance on a daily closing basis (New York 5 pm EST), I’ll remain cautiously bearish the EURAUD. The reason I’m staying particularly cautious here has to do with the uptrend that’s been in place for over a year.
Alternatively, a daily close back above the 1.5770 area would negate the bearish outlook and re-expose 1.5890.