EURAUD looks ready for a selloff as price is forming a double top reversal pattern on its 4-hour time frame. The pair has yet to break below the neckline at the 1.5650 minor psychological mark before confirming the downtrend.
The chart pattern is approximately 200 pips tall, so the resulting breakdown could be of the same height. However, the 100 SMA is still above the longer-term 200 SMA to signal that the path of least resistance is still to the upside or that the uptrend could carry on.
Stochastic is also pulling up from oversold levels to show that buyers are getting back in the game. In that case, another test of the tops around 1.5800 could be underway and perhaps even a break higher.
Euro zone economic data turned out mostly stronger than expected, with sentiment indicators showing a smaller than expected dip in confidence. The German ZEW economic sentiment index fell from 20.4 to 17.8 versus the estimated drop to 16.0 while the region’s index dipped from 31.8 to 29.3 versus the estimated 28.4 figure.
Meanwhile, data from Australia was mixed but saw more upside surprises. Construction work done for the previous quarter sank 19.4% versus the estimated 9.8% drop while the MI leading index fell 0.2%. On the flip side, the wage price index grew by 0.6% versus the estimated 0.5% uptick.
Up ahead, PMI readings from the manufacturing and services sectors of Germany and France are due. Small dips are eyed as well, which could bring the region’s overall readings down.
By Kate Curtis from Trader’s Way