A technical breakout initiated EURAUD bulls, but investors might need more data to gauge the future price movement. Let's see the upcoming price direction of this instrument from the EURAUD analysis.
AUD Bears Were Initiated From Downbeat China Data
The Australian dollar entered negative territory on Friday at the end of the week due to fluctuating domestic interest rate expectations and tepid support from China's mixed economic data.
Although China's service sector witnessed a modest increase in activity in February, its manufacturing sector remained stagnant, negatively impacting Australian commodity exports' prices, particularly iron ore.
A relatively subdued inflation report in Australia strengthened anticipations that the Reserve Bank of Australia (RBA) had presumably concluded its rate increases. A rate cut is the next likely action, although this is not anticipated until August at the earliest
The forthcoming indicator for the rate outlook is contingent upon the release of Gross Domestic Product (GDP) data on March 6. Analysts have speculated that the data may indicate negligible expansion or even a contraction in the December quarter.
A Rate Cut Is Not Anticipated By ECB
In the interim, it is expected that the European Central Bank (ECB) will not change interest rates at its meeting on Thursday. Instead, the focus will be on revised economic projections and indications from President Lagarde concerning possible adjustments to interest rates.
The Eurozone faced substantial economic challenges the previous year, as increased interest rates restrained demand and governments reduced spending. Particular difficulties befell Germany due to the impact of a global trade downturn on its export-oriented economy.
ECB officials have cautioned against precipitous rate cuts despite the deceleration in anticipation of a resurgence of inflation. The probable occurrence of a rate reduction in June has been identified, thereby granting access to the most recent wage data.
The upcoming meeting is expected to function as a prelude to June, during which the central bank will likely reiterate its prudent stance regarding interest rate modifications until it attains certainty that inflationary forces have diminished.
EURAUD Technical Analysis
In the daily chart of EURAUD, the overall market momentum is bullish, supported by the falling trendline breakout. Moreover, the dynamic 20 day EMA is supportive to bulls as it remains below the current price with an upward slope.
Based on this outlook, a bullish trend trading opportunity is valid as long as the price trades above the 1.6550 near-term level. In that case, the primary aim would be to test the 1.6900 key resistance level.
On the other hand, an immediate bearish recovery with a daily candle below the 1.6500 level could eliminate the bullish structure and lower the price at any time.
