Talking Points – AUD/USD, EUR/AUD, Evening Star Candlestick Pattern
- Despite bullish signs in AUD/USD, the Australian Dollar lost ground versus the greenback
- AUD/USD prices might have set themselves up for consolidation as we head into Q4 next
- Meanwhile, EUR/AUD prices may resume falling on bearish confirmation via weekly chart
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AUD/USD Technical Outlook: Neutral
Despite the head and shoulders bullish reversal candlestick pattern in AUD/USD on the daily chart, the Australian Dollar lost ground against its US counterpart last week. Resistance held around 0.73106 which is the lows achieved back in July. It ultimately prevented the pair from testing the long-term descending trend line from February as well. With that in mind, the AUD/USD technical outlook will change to neutral next.
This is because the Australian Dollar s might have set itself up to enter consolidation mode in the week ahead as the pair oscillates between key support and resistance. The former seems to be a range between 0.7160 and 0.7145 which are the December and May 2016 lows respectively. The latter is the aforementioned July 2018 lows.
In the event of a breakout to the downside, AUD/USD may find its next area of support at 0.70852 which currently stands as this year’s low. Descending there would also invalidate the head and shoulders formation. Meanwhile, a push above resistance exposes the February trend line followed by descending resistance which is created by connecting the July and August highs.
AUD/USD Daily Chart
EUR/AUD Technical Outlook: Bearish
Meanwhile, the bearish technical outlook for EUR/AUD prices remains despite support holding up on the daily chart. This is because when looking at the EUR/AUD weekly chart, progress was made further to the downside after the formation of an evening star bearish reversal pattern. Analyzing weekly charts can offer insights to a more forward-looking outlook that may cancel out near-term noise.
EUR/AUD Weekly Chart
With that said, we are closely watching key horizontal support on the EUR/AUD daily chart which is around 1.60587 as the 38.2% Fibonacci retracement level. This area has kept prices at bay on numerous occasions in September including on the 4th, 19th and now the 28th. Breaking below would likely offer the chance for the pair to resume the downtrend it began via the evening star candle pattern earlier this month (also present on the daily chart).
Such an outcome would place the 50% midpoint as the next target at 1.59673 followed by the 61.8% retracement at 1.58759. Meanwhile, near-term resistance may be at 1.61717. Climbing above that then exposes the September 2015 & February 2016 highs at 1.62505. For updates on Australian Dollar prices, you may follow me on twitter here at @ddubrovskyFX.
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
