The eurozone is scheduled to print a fresh batch of PMI readings today!
Can this spur a bounce or break from EUR/AUD’s triangle support?
On the hourly chart below, you can see that the pair formed lower highs and found support at the 1.6210 area, creating a descending triangle formation.
EUR/AUD: 1-hour
EUR/AUD has been stuck inside this consolidation pattern for more than a couple of weeks already, and price just bounced off the resistance again.
The pair is now halfway through on its move down to the triangle bottom, but technical indicators have yet to make up their mind on whether support is bound to hold or not.
Moving averages are oscillating to reflect rangebound action, barely offering strong directional clues at the moment. Still, it’s helpful to note that price is below both indicators, so these could hold as dynamic resistance levels.
However, Stochastic is already indicating oversold conditions and is starting its ascent. This means that EUR/AUD could follow suit as bullish pressure picks up.
In that case, euro bulls might be looking to charge soon and go for either a bounce off the triangle support or a break of the triangle top near the 1.6250 minor psychological mark.
If the latter happens, the pair might be in for a rally that’s at least the same height as the chart pattern or roughly 150 pips.
Just note that EUR/AUD moves an average of 124 pips per day, so catching a break above the 1.6250 area with a stop at S1 (1.6170) and aiming for R2 (1.6420) could be a reasonable upside target.
PMI readings from Germany and France might be the main catalyst for a breakout today, as strong upside surprises could be enough to seal the deal for more ECB rate hikes. After all, ECB officials and Chairperson Lagarde herself have been emphasizing the need to do more in order to combat inflation.
Don’t forget to keep tabs on overall risk sentiment, though, as any major shifts could also dictate the direction of the higher-yielding Aussie!
