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EUR/USD at Key EMA in Recent Breakdown, AUD/USD Fails at Pivot Retest

EUR/USD at Key EMA in Recent Breakdown, AUD/USD Fails at Pivot Retest

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- EURUSD has turned at H4 34-EMA two times since August 27.

- AUDUSD retraced to break level but was rejected - good for shorts.

- Euro Punished by ECB’s New Measures as QE Remains on Hold

The EURUSD breakdown has respected one moving average in particular on the H4 timeframe, and now it's time for the trend to continue or to reverse. The 34-EMA has served as resistance to price since August 17, with price having turned and failed there on each attempt.

Coinciding with price turning at the H4 34-EMA in EURUSD has been the Slow Stochastics turning around and reversing lower near the 50 median line. Such was the case on each rejection of the H4 34-EMA; so we are looking for this condition to be held in order to maintain EURUSD shorts. For now, the post-NFP swing high (a weak report for the US Dollar) should serve as resistance near $1.2990.

Elsewhere the technical breakdown in AUDUSD looks rather clean, considering that a wave of better than expected Australian labor market data propelled the pair back into the former March-September range support lows near $0.9205/20, yet price was unable to achieve a return to the range.

In the classic nature of support turned resistance, AUDUSD shorts are thus encouraged by the failure and the march to $0.8906 can continue, the target of the topping pattern that may have just begun.

Something to watch over the next few days: the direction of long-end US Treasury yields. The rolling 20-day correlation between the Dollar Index (DXY) and the 10-year US Treasury Note yield is at its highest level since early-February at +0.593. If US yields decide to play catch up, there may be a bonafide cushion inflating underneath the buck:

EUR/USD at Key EMA in Recent Breakdown, AUD/USD Fails at Pivot Retest

Read more: AUD/USD Top Measures to 0.8906, EUR/JPY Revisits 138.05 Resistance

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail

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