EURAUD Channel Breakout (Feb 24, 2016)

However, price made a downside break of support recently, indicating that a reversal might take place.

EURAUD had been trending higher on its 4-hour time frame, trading inside an ascending channel connecting the latest highs and lows. However, price made a downside break of support recently, indicating that a reversal might take place.

Price dipped to a low of 1.5160 before showing signs of a pullback. Using the Fib tool on the latest swing high and low shows that the 38.2% level lines up with the broken trend line around 1.5575. A larger retracement could last until the 50% Fib at the 1.5700 major psychological mark or the 61.8% Fib at 1.5835.

The 100 SMA is still above the 200 SMA for now but a downward crossover appears imminent, signaling that further declines are likely. Stochastic is pointing up, suggesting that buyers are taking control, while RSI is heading north as well. Once these oscillators reach the overbought levels, selling pressure could resume.

Earlier today, Australia printed a couple of weaker than expected quarterly reports. Construction work done for Q4 2015 fell 3.6%, worse than the projected 2.1% drop and the previous 1.8% slump. The wage price index rose 0.5%, short of the projected 0.6% increase. 

Yesterday, Germany's Ifo business climate index posted a weaker than expected reading of 105.7 versus the projected fall from 107.3 to 107.0. There are no major reports due from the euro zone today but expectations of additional ECB easing in March could continue to dampen demand for the shared currency.

Private capital expenditure data is due from Australia on Thursday and a 3.1% decline is eyed. Weaker than expected results could mean more losses for the Aussie, especially since risk aversion appears to be back in the markets.

By Kate Curtis from Trader's Way