FxNews – In today’s comprehensive EURAUD forecast, we will first scrutinize the current economic conditions in Australia. Following that, we will meticulously delve into the details of the technical analysis pertaining to the EURAUD pair.
The Inflation Enigma in Australia
Reuters – The Reserve Bank of Australia (RBA) has recently expressed concerns over the persistently high inflation in the country, particularly in the services sector. Marion Kohler, the Acting Assistant Governor of the RBA, highlighted this issue in a recent speech. She suggested that the process of bringing inflation back within the target range might be more protracted than initially anticipated.
Last week, the RBA raised its cash rate to a 12-year peak of 4.35%, indicating that additional policy tightening might be necessary. The central bank aims to bring inflation within its target range of 2-3% by the end of 2025. However, the current inflation trends suggest that achieving this goal might be a challenging task.
Kohler also pointed out that supply shocks, such as the recent surge in fuel prices, could lead to unexpected increases in headline inflation. These unforeseen events serve as a reminder of the potential hurdles on the path to stabilizing inflation. “The road ahead could be bumpy,” she cautioned. On the topic of the labor market, Kohler noted that the RBA anticipates a gradual easing. The unemployment rate, currently at 3.6%, is expected to rise to around 4-1/4% by 2025.
These inflation trends and monetary policy adjustments have significant implications for the Australian economy. On the one hand, high inflation and policy tightening can put pressure on consumers and businesses, potentially slowing economic growth. On the other hand, these measures are necessary to maintain economic stability and prevent runaway inflation. Therefore, while the road ahead may indeed be bumpy, these steps are crucial for the long-term health of the Australian economy.
The EURAUD currency pair is currently in a bullish flag pattern. Bears briefly broke below this flag, but their efforts failed, allowing bulls to regain control from the S1 support level at 1.644. Now, the pair is challenging the R1 resistance at 1.689, with the RSI indicator staying above 50, indicating a bullish market sentiment.
Zooming into the 4-hour chart reveals a long wick candlestick pattern. During this time, EURAUD prices dipped to the 23.6% Fibonacci retracement level, while the RSI was in the overbought zone. Given the daily chart’s bullish trend, we might see a correction extending to the 38.2% and then the 50% Fibonacci levels. The October high also supports this potential movement.
FxNews analysts advise keeping a close eye on the Fibonacci retracement levels for bullish candlestick patterns. They also recommend waiting for a break above the October high before placing new long orders on EURAUD.
J.J Edwards is a finance expert with 15+ years in forex, hedge funds, trading systems, and market analysis.