I Expect An EUR/AUD Correction to 1.5750

On the W1 time frame the pair has a well-formed pennant and has reached its support and resistance four times. There is a breakout at 1.5735. The depreciation after the breakout was 503 pips, and the pair has found support in the zone around 1.5274 – 1.5282 where it has formed a double bottom that is very visible on the H4 time frame.

On the W1 time frame the pair has formed two spinning top bars with overlapping bodies which have closed right above the support zone.

During the next week I expect the pair to continue rising toward the resistance zone around 1.5750 – 1.5800 and to test the trend line it broke out below.

After the test the pair should renew its depreciation.

If the pair reaches the limit of the pennant the target of the depreciation should be at 1.4130 – 1.4100.

I Expect A Corrective EUR/AUD Move North

The pair has been developing a downward trend since 25th April 2018, and for a little over a month it depreciated with almost 700 pips. For the past two weeks (in the second half of the depreciation) the movement was within a perfectly formed trend channel.

On the D1 time frame we can see that the price has moved outside the channel and two already closed bars – a doji and a spinning top – are the first signals for a possible correction to the upside.

On the H4 time frame there is a RSI divergence which is the next signal for the beginning of a possible correction.

This is my reasoning for the expected correction.
If the pair reaches the limit of the divergence it should rally to 1.5650-1.5680.

EUR/AUD Could Begin A Correction Of The Upward Trend

As it could have been expected, EUR/AUD was moving to the upside for the past month. Now however, the pair reached a strong resistance on the monthly and W1 time frames and I think there will be a correction of the upward trend.

That is confirmed by the RSI divergence of the last three highs on the D1 time frame which is a signal for a possible drop to the zone around 1.5400 – 1.5340.

In case that correction deepens I think we can expect depreciation to around 1.5000.

In my opinion, however, the pair is bullish and after the end of this potential correction we could expect a rally to 1.6000 or even to 1.6600.

In the alternate scenario the upward trend will accelerate and it will head for its target to the upside at 1.6000 in the coming week.

EUR/AUD Is Developing Withing A Wide Consolidation, A Breakout To The Downside Is Possible

EUR/AUD is developing in a rather wide consolidation, forming a figure on the D1 time frame which I interpret as a pennant.

On the same time frame we can notice that for the past eight days the pair has been forming small bars the bodies of which overlap and which have formed the barbed wire pattern.

From these technical analysis observations we can conclude that that in case of a breakout below the support trend line we could expect the pair to depreciate and its first target to the downside would be around 1.4700 – 1.4650. If it reaches the limit of the pennant too the drop could be around 750 pips.

In case there is a breakout to the upside, however, the first target would be around 1.5400-1.5450 followed by 1.5550.

EUR/AUD Is Developing Within A Wide Range

After the rally from 1.39846 (16th April 2017) to 1.52181 (2nd June 2017) – marked on the chart with a pale blue line – EUR/AUD started developing within a wide range. That is especially obvious on the W1 time frame.

After three waves forming a downward trend channel, the first and third of which having relatively similar heights, the pair did not renew its move to the upside but it rather stalled to test the resistance trend line of the it broke out above. The pair has been moving between 1.4850 and 1.4950 for almost ten days now.

The range will possibly continue developing for some time, but once there is a breakout to the downside the support on the way down will be around 1.4650 – 1.4600.

To the upside the resistance is around 1.5100 and in case there is a breakout above it we could see a rally to 1.5550 – 1.5600.

EUR/AUD Is Aiming For The Support at 1.4450

EUR/AUD is in the support zone around 1.4650, but in my opinion the pair will break out below that support and the pair will continue falling toward the next strong support zone around 1.4450, which could hold off the move to the downside for a longer period of time.

Still, we should not forget that there is an unrecovered gap of about 180 pips (from 21st – 23rd April 2017) and it is very possible for the pair to recover it during the next drop.

If that happens we could expect the drop to continue for a test of the support around 1.3750 – 1.3800.

In the alternate scenario the pair won’t succeed in breaking below 1.4450 and it will renew its upward trend to 1.5500 - 1.5550.

EUR/AUD Is Forming A Correction After A 3-month Rally

After the rally that lasted for three months, during which EUR/AUD appreciated with 1600 pips – from 1.36260 до 1.52264, the EUR is finally forming a correction of about 560 pips. Despite that, the gap that formed on 24th April 2017 still has not been recovered.

If we examine the monthly time frame, we will notice that the pair has reached a strong support zone around 1.4650 – 1.4700. And it seems that the pair will begin rallying exactly in this zone after several days of consolidation, its possible target being 1.4880- 1.4900.

To the downside the pair could potentially reach 1.4450 – 1.4400, but even after such a drop the gap won’t be recovered at this stage.

On principle the "inverted hammer" bar that formed for March 2017 is a signal for a long-term rally and I doubt that it has ended at this stage. It is possible that after the end of the correction to the downside the rally will continue with its first target being 1.5600 or even above that level.

EUR/AUD Is At A Strong Resistance Level

The EUR/AUD situation seems to be becoming clearer and clearer.

It is obvious that the pair is forming a flat correction in the zone of the weekly and monthly resistance around 1.49.

On the H4 time frame one can clearly see this corrective movement that interrupted the upward trend from 1.39816 (17th April 2017)  to 1.49099 (4th May 2017).

The correction looks like a pennant and there has been a breakout, with its limit being at 1.4955.

Considering the strong resistance above which the pair needs to break out, however, that expectation for a rally may prove incorrect and there could be a new drop toward 1.46.

However, even if there is a drop, I think that the correction remains valid, which hints that after it ends the pair may continue rising to 1.53 – 1.54.

EUR/AUD Is Preparing For A Rally to 1.4870 In The Short Term, In The Medium Term There Will Be A Possible Correction To The Downside

One can see very clearly on the H4 and H1 time frames that the pair has broken above a flag with a limit of about 120 pips, starting from the breakout level at 1.4751. If it reaches said limit, we could expect a rally to 1.4870 or 1.4900.

Still, before it continues rallying it is very possible for the pair to retrace back to test the resistance trend line it broke out above, not to mention that on the H1 time frame the pair has reached a resistance level and it has begun a pullback. The test appears logical, considering that in a few hours the market will close and the volatility is disappearing, there is simply no momentum left for another rally.

We should also follow the weekly time frame – we can clearly see that the pair is at a resistance level there, and the bearish bar, which should close in a few hours, is a signal for a reversal.

So the potential move to the upside could turn out to simply be a double top, after which there might be a correction to the downside.

EUR/AUD Will Continue Rallying, Especially If Emmanuel Macron Wins

EUR/AUD did not reach the limit of its divergence and close the gap as I thought it would. Actually the correction was pretty shallow – only 200 pips, after which the pair continued moving north, climbing with another 400 pips, from 1.45013 to 1.49104.

On Sunday is the run-off election between Emmanuel Macron and Marine Le Pen in France, which will likely be won by the former as the EU hopes, and that will likely give the required fundamental push to the EUR so I think we will see this pair rally again. On the other hand, if Marine Le Pen wins despite the polls that predict that she won’t, we could see the EUR drop in an unprecedented manner.

What is the technical analysis picture?

On the monthly time frame there is a strong resistance, and on the daily one we can see a pennant that the pair has broken out above and there is about another 500 pips until it reaches its limit. If it breaks out above 1.4850 – 1.4900, I think we could expect a rally to 1.5300 or even higher than that.

On the monthly time frame we can also see an inverted hammer bar right below the support at 1.40. Such a formation is a signal for a long-term rally, which also supports my analysis.
So from a technical analysis point of view the move north appears more likely.

An RSI Divergence Between Six Highs Is A Signal For A EUR/AUD Trend Reversal

Today is the end of the trading week and in a few hours the market will close, but the situation on the H4 time frame is a serious warning that there will be a trend reversal. That would mean a likely closing of the 180 pips gap that formed on Monday after the presidential elections in France.

To confirm this expectation I’d like to point out that the pair has reached a strong resistance on the D1 and W1 time frames and another rally would be difficult without a correction.

Regarding my expectation about what is the target of that correction, considering the divergences, I would say that the main target on the way down is 1.40860, together with several closer ones at 1.41965, 1.41766 and 1.41176.

If the pair reaches the target at 1.40860, the gap that began from 1.42097 will definitely be closed. So all that remains is to wait and see how the pair will develop next week.

EUR/AUD and EUR/USD Are Forming a Powerful Bullish Trend

EUR/AUD has formed a RSI divergence between the last two lows, as well as an engulfing bullish bar on the weekly time frame and strong bullish bars once again on the weekly and the daily time frames, which demonstrate that the bulls are in control now.

These signals are unequivocal and very telling that at the moment the pair is forming a strong upward trend.

Every retracement this pair forms can be used to open long positions at the moment and, in my opinion, this RSI divergence between the last two lows on the daily and weekly time frames will result in a move to the upside towards 1.4884.

The same logic applies to EUR/USD.

The move to the upside began after a RSI divergence between the last two lows on the daily and weekly time frame, as well as an engulfing bullish bar on the weekly time frame. In this case the move to the upside resulting from this divergence will likely reach 1.1254.

EUR/AUD – A Sideways Consolidation and a Triangle

For now it is not clear whether the triangle that is forming on the one-hour and the four-hour time frames is the end of the range and whether there will be a breakout of either of its trendlines.
I am saying “either”, although if we look at the four-hour time frame it appears that the breakout will be to the downside.

We need to be careful, because on the daily time frame it’s obvious that the pair is at a strong level of support, so it is possible that the range will last a while longer.

Still, if there is a breakout it’s possible for the move to the downside to continue to the critical zone that is visualized by a blue rectangle. The weekly time frame confirms the possibility of that scenario.