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EUR/AUD could reach 1.4300!

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The euro is looking quite bearish against the Australian dollar following the aggressive buy a week ago after the Reserve Bank of Australia lower its benchmark interest rate to a historical low of 2.25 percent. However, the upward advance which started from the 1.4500 was halted by the psychological level of 1.4900. From there, the price retraced more than 50% of the move up from the 1.4900 to the low of January 18, 2015.

Technically speaking, this enabled the pair to remain below the descending trend line, which started back from the beginning of February, as well as below the 50-period SMA on the 4-hour and daily chart. However, I am not fully convinced at this stage, given that we’ve seen a break below the 50-period SMA and the 1.4500 level on the 4-hour chart a few hours ago as well as the failed attempt above the psychological levels of 1.4800 and 1.4700, which suggests traders are not as bullish as they once were.

The weakness is also confirmed by our short-term studies, since the MACD remains in negative territory and the RSI has fallen below the mid-point at 50. In addition to this, the stochastic oscillator has dropped to 20, after finding resistance slightly below the 80 level.

Therefore, as it stands, if the bears manage to drive the battle lower, then I would expect the price to challenge the 1.4420 level, pretty soon and then the 1.4300 level. From here, I would expect the bulls to give their battle and if they manage to resist, then it might drive the battle back towards the 1.4420 level. As long as the previous top holds, the channel is considered valid, since the rate is printing lower highs and lower lows.

On the other hand, if the bulls are strong enough to push the price further up, which I do not foresee at the moment, I would expect extensions towards the 1.4650 level, which includes the descending trend line. A clear break above the 1.4650 barrier, would signal the completion of the correction, prompting a move towards the 1.4900 hurdle.

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