EURAUD fell to a 4-month low of 1.5315 on Tuesday, coming close to touching the 50% Fibonacci retracement of the upleg from 1.4421 to 1.6190 between July 2017 and March 2018. The pair has reversed sharply from the more than two-year high of 1.6190 set on March 28.
However, with momentum indicators having run into oversold territory, an upside correction is currently in progress and prices have jumped higher today. The RSI is pointing up but yet to break out of oversold ground. If it manages to climb above 30 over the next day or two, this would signal a more convincing rebound. The stochastic oscillator is also heading higher, with the %K line just crossing above 20.
If prices maintain the positive momentum, initial resistance could come from the 200-day moving average around 1.5485, followed by the 38.2% Fibonacci at 1.5515. A successful break above the 1.5515 level would strengthen the upside momentum, driving prices towards the 23.6% Fibonacci level at 1.5775. If the pair is able to overcome this hurdle, it could then attempt reclaiming the ascending trend line, which it needs to do in order to keep its longer-term bullish structure intact.
However, if prices were to head lower again, immediate support would come from the 50% Fibonacci at 1.5305. A breach of this level would risk shifting the longer-term outlook to a neutral one, with the next support coming from the 61.8% Fibonacci at the 1.5100 handle.
