EURAUD Countertrend Setup (May 01, 2017)

If so, the pair could head back to the channel support at the 1.4300 area for a quick pullback.

This support area lines up with the 100 SMA dynamic inflection point, adding to its strength as a floor. The 100 SMA is above the longer-term 200 SMA on this time frame, confirming that the path of least resistance is to the upside. 

Stochastic is on the move down to show that sellers are in control of price action. This also signals that the channel resistance around 1.4650 could keep gains in check for the time being and that a correction is due.

Over the weekend, China printed its official PMI readings and reported declines in both manufacturing and non-manufacturing sectors. The former dipped from 51.8 to 51.2 versus the projected fall to 51.7, reflecting a much slower pace of industry expansion than expected. The latter dropped from 55.1 to 54.0.

European banks are closed for the holiday today so lower liquidity is expected and no major reports are lined up. In Australia, the RBA statement is coming up on Tuesday so traders might price in their expectations as early as today. Later in the week, expectations for the second round of French presidential elections could have an impact on euro movement.

By Kate Curtis from Trader's Way