Technical Analysis – EURAUD posts ‘death cross’, yet remains quiet

Marios Hadjikyriacos, XM Investment Research Desk

EURAUD recently recorded a so-called death cross, meaning that the 50-day simple moving average (SMA) crossed below the 200-day one, which is a negative trend signal. That being said, the pair continues to trade very quietly between 1.6530 and 1.6020 since early June, suggesting that the very short-term outlook looks neutral, even if the broader one is negative.

Short-term oscillators paint a mildly bearish picture, suggesting that the next move may be lower. The RSI is below 50 already and looks to be inching lower, while the MACD – already negative – could cross beneath its red trigger line soon.

If the bears stay in the driver’s seat, the first obstacle that could halt downside extensions may be the lower bound of the recent range near 1.6020. If that gives way, it would be a strong signal that the broader downtrend is back in play, opening the door for the 1.5900 zone next. Even lower, the April 2019 low of 1.5680 could cap further declines.

Should the bulls wrestle back control, initial resistance may come from the upper bound of the latest range around 1.6530, which may be an especially tough region to crack as it also encompasses the 50- and 200-day SMAs. An upward violation would be a very encouraging sign for the bulls, allowing them to push towards the 1.6780 area.

To recap, as long as the pair is trapped between 1.6530 and 1.6020, the very short-term outlook is neutral. Yet, the bigger picture looks negative.