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EUR/AUD has been trending downwards since the start of November due to the interest rate difference between Australia and the Eurozone. Ongoing tensions between Russia and Ukraine and Germany’s political crisis continues to weigh heavily on the Euro and Trump’s policies in the US.
According to the Reserve Bank of Australia, interest rates are unlikely to be lowered anytime soon and may even need to be raised in certain situations. Policy makers believe it will take more than one favourable quarterly inflation report to justify easing.
Markets are pricing in a 40% chance of a quarter-point rate cut in the 4.35% cash rate in February, and 60% for April.
Several factors could lead to a financial problem in the eurozone, according to the ECB’s financial stability evaluation. The news had a negative effect on the euro.
According to the report, the eurozone’s political unpredictability, disappointing growth, and growing public debt could potentially bring about an economic downturn that would place pressure on banks the region’s financial stability.
The European Central Bank is expected to reduce its policy rate by 25 basis points to 3% in December, then to 2% or lower by the end of 2025. This is mostly due to the Eurozone’s inflation dropping to 2% year-over-year in October.
Technical Analysis
Source: TradingView
EURAUD has been trending downward ever since it formed a high of 1.63600. The formation of a bearish flag brought the price below the pivot line and breached support at 1.6210. The pair moved below the 100 EMA which continues to place bearish pressure on price.
If the pair fails to rebound above support, traders will be watching for the formation of new lows with potential support around 1.61100.
In an alternative scenario, if price is able to rebound above resistance around 1.62100, markets will be watching for any further upside movements towards the pivot line at 1.62800
