Late Summer Collapse in EURAUD
As another week winds down to a close and we move deeper and deeper through the summer here and approach the fall, it’s time once again to take stock of the weekly action. It’s certainly been a more volatile week than we’ve seen recently, hopefully a sign of things to come. Looking through the big moves and chatting with traders it seems the trades that are capturing the most attention are those found in the commodities crosses, specifically EURAUD. The pair fell almost 300 pips from recent highs this week before stalling out into the back end of the week. So, if you caught the move, congratulations. If you missed it? There’s always next week! Now, let’s take a look at what caused the move and why this was a great trade.
What Caused the Move?
Commodities Rebound
The main driver behind the move has been the rebound in commodities currencies this week, which has really helped drive support back into AUD. The Aussie had been on the backfoot over prior weeks as a result of the fresh lockdowns announced in Australia and fears that the Delta surge might de-rail the economic recovery underway there. Along with this, the rebound in USD over recent week had been dragging commodities prices lowers, specifically iron ore and copper which are two of Australia’s main exports. However, the rebound in commodities this week, as a result of an easing of delta concerns and a weakening of the US Dollar, have allowed the Aussie to find its footing once again. Reduced market expectations of a tapering signal from Fed’s Powell at the Jackson Hole event today have turned the Dollar lower near term, which is benefiting high-beta currencies such as AUD.
EUR Under Pressure
On the EUR side of the coin, the single currency has come under pressure this week over fears of a fresh refugee crisis in the eurozone as a result of the situation in Afghanistan. Given the political strife and tension which typically accompanies such episodes in the Eurozone, there are fears that a fresh refugee crisis will damage the economic recovery, placing even greater strain on the customs union heading into the autumn and winter.
So, now we’ve walked through the fundamental backdrop, let’s take a look at the technical picture.
Technical Views
EURAUD
The sell off this week came from the latest test of the 1.6419 level, which continues to hold as firm resistance. However, for now the decline has been stalled into a retest of the 1.6136 level support and with RSI and MACD both still bullish, there is room for the recent uptrend to continue while this level holds. Should price break below this support, however, the next level to watch will be the 1.5969 support.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.