EURAUD Reversal Formation (Mar 21, 2017)

Price has yet to break below the neckline at the 1.3900 area to confirm the potential selloff.

The 100 SMA crossed below the longer-term 200 SMA to show that the path of least resistance is to the downside. Price seems to be pulling back but the 100 SMA could serve as near-term dynamic resistance. A break below the neckline could take the pair down by around 300 pips or the same height as the chart formation.

Stochastic is on the move up to suggest that buyers are still in control of price action. However, the oscillator is already nearing the overbought zone which would reflect weaker buying pressure. Once it turns lower, sellers could regain control.

The euro got a bit of a boost from the French presidential elections debate which ended up giving the lead to Macron in the polls. This eased fears of a Le Pen victory and therefore lowered the odds of a "Frexit" or further instability in the region.

Meanwhile, the Australian dollar got bogged down by the RBA meeting minutes which revealed that the central bank is keeping close tabs on housing market risks. The quarterly HPI posted a larger than expected 4.1% gain in prices for Q4, outpacing the projected 2.4% pickup.

There are no major reports due from Australia and the euro zone in the next few days, although the latter has the PMI reports from Germany and France due on Friday. Election-related updates could continue to influence euro action while market sentiment could push the Aussie around.

By Kate Curtis from Trader's Way