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EUR/AUD Breakout Could Grow Legs

EUR/AUD Breakout Could Grow Legs

Paul Robinson, Strategist

EUR/AUD Highlights:

  • EUR/AUD breaking out above well-tested resistance
  • Level dates back to 2015, but been in play a lot in past two years
  • Could run hard with a risk-off event
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EUR/AUD has had significant play around the 16555 level since early 2019, with the origination of the level dating back to August 2015 when markets got roiled on Chinese slowdown fears. But the recent action around it pre and post corona panic cemented it as a level of significance.

Given how much time has been spent around 16555 the 200-day has become hinged to the same vicinity since May. The breakout could be rather significant as long as it holds. In the absence of a risk-off event we could see 17500, with the help of a sizable risk-off event we could see much higher levels.

The correlation between the VIX and EUR/AUD is typically positive across all time-frames, with the past year holding a statistically significant 0.91. If stocks sell off then look for the pair to spike along with volatility.

Watch for a retest of prior resistance on a pullback, it could offer a low risk entry for would-be longs. A breakdown back below 16500 will bring the breakout into question and put price back inside the range it had been suck in since June, and on that a neutral stance is likely warranted.

EUR/AUD Daily Chart (breaking away from long-term resistance)

EUR/AUD daily chart

EUR/AUD Weekly Chart (2015 origination)

EUR/AUD weekly chart

EUR/AUD Chart by TradingView

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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