EUR/AUD: Sellers Gain Momentum Ahead of Lagarde’s Speech

Market Overview

On Monday, 2nd December 2024, the EUR/AUD pair experienced significant downward pressure as investors anticipated potential monetary easing by the European Central Bank (ECB). Expectations of a 50-basis points rate cut at the upcoming December meeting have weakened confidence in the euro. In contrast, stronger-than-expected economic data from China supported the Australian dollar. The Chinese Manufacturing PMI for November came in at 51.5, indicating continued expansion in the manufacturing sector and surpassing market expectations. This positive news has improved sentiment for the Australian dollar, adding further pressure on the EUR/AUD pair.

Technical Analysis

On the four-hour chart, EUR/AUD is currently fluctuating between the key resistance level at 1.62219 and the support level at 1.61695. Sellers are attempting to push the price below this critical support level. If they succeed, it could lead to further declines, targeting the next support levels at 1.61322, 1.61127, and eventually 1.60847.

The bearish outlook is supported by momentum indicators. The Relative Strength Index (RSI) is in bearish territory, indicating ongoing selling pressure, although it is not yet in the oversold zone. The MACD histogram remains negative, with both the MACD line and signal line pointing downwards, highlighting strong downward momentum. Additionally, the price action remains below the moving averages, suggesting continued weakness in the pair.

Alternative Scenario

However, if the price manages to break above the resistance level at 1.62219, attention would shift to the next target at 1.63067. This level represents the recent high, and a successful breach could invalidate the current bearish outlook, indicating a possible shift in momentum towards buyers.

Key Levels

• Resistance Levels:
  • 1.63067 (Recent High)
  • 1.62219 (Immediate Resistance)
• Support Levels:
  • 1.61695 (Key Support)
  • 1.61322 (Next Support)
  • 1.61127 (Further Support)
  • 1.60847 (Major Support)

Key Events to Watch

Traders are closely watching upcoming events that could impact EUR/AUD. Chinese manufacturing data has already provided support to the Australian dollar, and ECB President Christine Lagarde’s speech later today will be crucial for the euro’s direction. Investors are also looking at the Eurozone unemployment rate, which is expected to remain at 6.3%. Any dovish remarks from Lagarde may weaken the euro further, particularly given the likelihood of an ECB rate cut in December.

Conclusion

EUR/AUD remains under bearish pressure amid stronger economic data from China and expectations of ECB easing. The support level at 1.61695 is crucial, and a break below it could lead to further declines. Conversely, a move above 1.62219 could shift the outlook towards a more bullish scenario.

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