As diverging macroeconomic paths widen the gulf between Europe and Australia, EUR/AUD is shaping up as a compelling long opportunity. Considering the eurozone’s surprising resilience paired with Australia’s faltering demand, optimism for EUR/AUD is palpable.

Fundamental Analysis

Euro (EUR) Strength:
Eurozone GDP growth came in at +0.6% QoQ and +1.5% YoY, surprising to the upside amid a broader global slowdown. Inflation continues to ease gradually, showing promise for EUR/AUD and helping the European Central Bank maintain a balanced policy stance. Unemployment is stable at 6.3%, and the current account surplus has widened to +19.3 billion, or +2.6% of GDP — a meaningful reversal from prior deficits. Fiscal dynamics remain under control, with a -3.1% budget deficit and debt at 87.4% of GDP, reflecting an improving structural position across member states.

Australian Dollar (AUD) Weakness:
Australia’s economy is showing signs of fatigue. GDP growth has slowed to just +0.2% QoQ and +1.3% YoY. Consumer demand is weakening, impacting EUR/AUD dynamics, with retail sales barely positive at +0.2% MoM and consumer confidence still under pressure. Inflation remains sticky at +2.4% YoY and +0.9% MoM, narrowing the RBA’s room to stimulate. The current account has flipped to a deficit of -14.7 billion (-2.1% of GDP), while trade balance momentum has stalled. Although the fiscal position remains favourable with a +0.6% surplus and low debt (43.8% of GDP), the real economy is slowing materially.

The macro narrative favours euro strength over Aussie softness, particularly as Europe recovers from its 2023 downturn while Australia appears to be entering one.

Sentiment Analysis

EUR/AUD sentiment has tilted towards euro strength. Hedge fund and CTA flows are exiting AUD longs amid weak domestic data and fading China optimism, reinforcing EUR/AUD potential. Meanwhile, EUR positioning is neutral and stabilising, providing dry powder for upside extension. Yield differentials have narrowed as markets price in a peak for the RBA and the ECB holds steady. Capital is returning to eurozone assets, with flows supported by the region’s improving economic momentum. Australia, in contrast, is suffering from deteriorating trade ties and commodity volatility.

The narrative has shifted: EUR is now viewed as a soft-landing currency, while AUD faces growth headwinds, weaker terms of trade, and elevated household debt vulnerability.

Technical Analysis

The daily chart for EUR/AUD is showing early signs of a breakout continuation after a multi-month consolidation above 1.76.

Ichimoku Cloud analysis reveals:

• Price is just above the cloud with a bullish cross on the Conversion and Base lines, indicating potential EUR/AUD gains.
• Leading Span A > Leading Span B = bullish Kumo structure.
• Lagging Span is flat but above price — suggesting a potential for bullish follow-through if price holds above 1.78.

RSI is at 46.63, pulling back from recent highs but still in neutral territory, suggesting a cooldown rather than a breakdown, beneficial for EUR/AUD positions. No bearish divergence is present.

MACD is in a mild bearish phase, with the line crossing below the signal but still near zero. The histogram shows limited downside pressure.

Volume has stabilised, with selling pressure not accelerating — a positive sign for bulls.

Trend structure on the weekly chart remains bullish, with higher lows forming since March 2025 and price defending key breakout zones.

Conclusion

EUR/AUD remains a fundamentally and tactically bullish setup. Eurozone growth surprises and current account strength support further appreciation for EUR/AUD, while the Australian economy faces multiple headwinds from weak retail, fading trade surpluses, and domestic demand fragility. Technically, the pair is consolidating above the cloud, with bullish structure intact and downside momentum fading.

A sustained break above 1.7880–1.7900 would confirm trend continuation toward 1.82, highlighting the opportunity for EUR/AUD traders. Dips remain buyable while the structure holds, making EUR/AUD a strong long candidate into Q3 2025.