The bottom of the long-term range on EURAUD seems to be holding as a floor, with a small double bottom formation materializing. Price is testing the neckline at the 1.4300 major psychological level and a break past this resistance could send the pair up by 200 pips or the same height as the chart formation.
In that case, the pair could make it up to the range resistance at the 1.4500 major psychological mark. However, the 100 SMA is below the 200 SMA so the path of least resistance could still be to the downside. Also, the 200 SMA appears to be holding as dynamic resistance for the time being.
Stochastic is moving up but is already dipping into the overbought region, signaling that buying pressure is exhausted and that sellers could take over. If that happens, another test of the range support could be seen.
Economic data from China showed a small dip in manufacturing activity, as the official PMI for the industry fell from 51.4 to 51.3. The non-manufacturing component improved from 54.5 to 54.6. However, the Aussie seems to be moving in tandem with the Kiwi, which has recently been dragged down by its employment report miss.
In the euro zone, the flash CPI estimate turned out much stronger than expected. The headline reading climbed from 1.1% to 1.8%, outpacing the consensus at 1.5%, while the core reading was unchanged at 0.9% as expected. The region printed a higher than expected flash GDP reading of 0.5% versus the 0.4% consensus and the earlier 0.3% uptick.
For today, EU economic forecasts are lined up, along with final manufacturing readings from the region’s top economies. Australia is set to print its building approvals and trade balance in the next Asian session.
[I]By Kate Curtis from Trader’s Way[/I]