EURAUD has been trading in a descending channel pattern on its 4-hour time frame and has recently bounced off the resistance.

Price is also breaching the middle of the channel to show enough downside momentum to reach the bottom. 

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside, which means that the selloff could carry on. Stochastic is turning back down as well, so price could follow suit. 

However, the channel support might keep near-term losses in check and trigger another bounce to the resistance. A long opportunity arises but could be risky since it would run counter to the trend. 

Australia just reported stronger than expected retail sales growth of 1.2% versus the 0.4% forecast and the earlier 0.5% gain. Earlier in the week, Australia’s building approvals also impressed with a 11.7% jump versus the estimated 0.9% drop. 

Data from China last week has also been positive for the Aussie, as gains in the manufacturing and non-manufacturing PMIs spurred expectations of stronger commodities demand. Chinese trade balance is due on Friday and a wider surplus is eyed.

Meanwhile, the euro has tumbled on weaker European equities performance as risk aversion took hold. Interestingly enough, this has been positive for the Aussie as it took part in gold rallies. 

By Kate Curtis from Trader’s Way