Talking Points – AUD/USD, EUR/AUD, Head and Shoulders, Evening Star
- AUD/USD prices soared amidst bullish signals, Aussie eyes the defining February trend line
- EUR/AUD prices depreciated as expected after a couple of notable bearish reversal signals
- Euro may keep losing ground to AUD after similar bearish signal on EUR/AUD weekly chart
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AUD/USD Technical Analysis Outlook: Bullish
Last week, we offered a neutral technical outlook for AUD/USD prices as we awaited further closes above a near-term descending resistance line from late August. Not only did we get that, but an inverse head and shoulders bullish reversal pattern formed in the aftermath. The combination of these two events have now changed the technical forecast for AUD/USD to bullish.
With that in mind, taking the distance between the head and the neckline of the candlestick formation would have AUD/USD climbing to the descending trend line from February. This area could act as near-term resistance. A break above it would entail possibly ending the dominant downtrend seen for most of this year thus far.
Meanwhile, immediate support appears to be the 61.8% Fibonacci retracement at 0.72685. A descent through that exposes the midpoint of the retracement at 0.72335. Beyond that eventually lies the December & May 2016 lows between 0.7160 and 0.7145.
AUD/USD Daily Chart
EUR/AUD Technical Analysis Outlook: Bearish
Previously, we gave a bearish technical outlook for EUR/AUD prices after the formation of an evening star reversal pattern on the daily chart. This simultaneously occurred with a break under a rising trend line from August and the inability of the pair to push above a rising range of former support now resistance. Not only did the pair fall about 0.70% but also the same bearish reversal pattern formed on the weekly chart below.
EUR/AUD Weekly Chart
Taking this into consideration, the bearish forecast for EUR/AUD will remain active for the week ahead given the absence of consolidation signals. From here, the pair may continue heading for the August lows and immediate support is the 38.2% Fibonacci retracement level at 1.6058. A descent under that then exposes the 50% midpoint at 1.5967.
Following that has EUR/AUD eyeing 1.5875 and then 1.5745. Meanwhile, near-term resistance is the 23.6% Fibonacci retracement at 1.6171. A climb above that opens the door to retesting the September 2015/February 2016 highs at 1.62505 before facing the September peak of 1.63544 on the daily EUR/AUD chart below.
EUR/AUD Daily Chart
** Charts created in TradingView
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
