EURAUD continues to tread water above trend line support that extends off the April 2015 low. I mentioned this level a few days before the ECB rate decision that took place on March 10th.
Despite the Euro’s aggressive rally during Mario Draghi’s Q&A session that followed the March 10th rate cut, a recent surge in the Australian dollar has limited the pair’s gains to the 1.50 handle.
What’s more, the lack of any meaningful bid at trend line support should have the bulls nervous about the prospect for further gains. One thing any potential buyer looks for after a market tests a key support level is follow-through, something we haven’t seen yet since EURAUD tested support on March 9th.
The bullish momentum we saw after the December 3rd spike is a perfect example of the level of conviction you want to see in order to take and maintain a long position. This time around things have been quite the opposite.
But just because the pair has struggled to find a bid doesn’t mean it won’t find a bid. An obvious bullish pin bar from this level could present a favorable buying opportunity. However, until that happens I have to favor the downside given the apparent lack of buying at current levels.
As a side note, the trend line you have on your chart may differ somewhat from the one shown below. This is due to the high level of volatility on December 3rd of last year that caused the session low to vary somewhat from broker to broker.
With this in mind, I’m calling this a support area with boundaries defined by 1.4720 and 1.4670. Of course these levels will change should the pair continue to trade above this area over the coming sessions.
