miroslava.micunkova's picture

EURAUD preparing foundations for lasting strength?

Looking at EURAUD over the past decade, an important floor was established around the 1.5480-1.5550 area. Above mentioned support was first lost in February 2010, approximately halfway through the decline from the 2.1099 all-time traded high.

After hitting an all-time traded low at 1.1607 in August 2012, a major correction rally developed upon completion of a multi-month Head & Shoulders base. Between 38.2-50% of the four year retreat from 2.1099 was retraced at 1.5822 in January 2014. Worth mentioning is a bearish “Doji” candle (highlighted green on the chart) that briefly penetrated the 1.5480-1.5550 support turned resistance, but seen the monthly close below at 1.5406. The following candle (highlighted green on the chart) was a bearish “Hanging man” providing additional evidence of the 1.5480-1.5550 resistance ahead of a slump.

About 50% of the 1.1607-1.5822 (August 2012 - January 2014) rally was retraced at 1.3805 in September last year and we expect the weakness to persist for now. However, in the coming months we expect a return to strength as the structure remains positive and the overall consolidation resembles a bullish “Flag”. A key higher low for a rally resumption is expected to form by 1.3314-1.3569, maybe as soon as 1.3980. Our preliminary long term target (6 month +) points at 1.6410 and 1.8020 (measured as 61.8 and 100% projection of 1.1607-1.5822 from 1.3805) further out.