EURAUD has been moving sideways recently and the latest set of market events have allowed the range to hold. 

Price just bounced off the resistance at 1.4475 and is now headed back towards support at the 1.4150 minor psychological level.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. This means that EURAUD is likely to head all the way down to test the bottom of the range. If selling pressure is strong enough, a downside break could even be possible, taking the pair lower by more than 300 pips.

Stochastic is already indicating oversold conditions, though, which suggests that sellers are already exhausted from the drop. In that case, a bounce off the range support back to the resistance could also be possible, although the moving averages could hold as near-term resistance around 1.4300.

In their policy statement, the ECB announced an extension of their QE program until December next year. This was accompanied by a reduction in the size of their monthly bond purchases from 80 billion EUR to 60 billion EUR, but analysts predicted that the easing program could go beyond the new end-date as well.

ECB staff forecasts were revised to show upgrades in next year’s growth and inflation forecasts but Governor Draghi pointed out that their targets are different from those estimates. This suggests that the central bank could continue taking action to boost growth and inflation much further.

Meanwhile, the Australian dollar sold off earlier in the week on a surprise GDP contraction for Q3. Australia’s trade balance also missed forecasts but components indicated that both imports and exports advanced. Chinese inflation figures were mixed but both reflected improvements over their previous readings.

By Kate Curtis from Trader’s Way