Introduction

The EUR/AUD pair has been in a downward trend. The Eurozone grapples with stagnant growth, declining business confidence, and an uncertain monetary policy outlook. Meanwhile, the Australian economy continues to show resilience, supported by strong trade balances and higher interest rates.

This analysis explores the fundamental, technical, and sentiment-based factors influencing EUR/AUD. It highlights key price levels and what traders should watch in the coming weeks.

Fundamental Analysis

The economic divergence between the Eurozone and Australia continues to favour a bearish EUR/AUD outlook. Australia’s stronger fundamentals are pressuring the euro in the EUR/AUD pair.

Eurozone: Economic Weakness Persists

• GDP Growth: The Eurozone’s economy stalled at 0.0% growth, underscoring economic stagnation.
• Inflation: The Eurozone’s 2.5% YoY inflation remains moderate, reducing the urgency for aggressive monetary tightening.
• Interest Rate Outlook: The European Central Bank (ECB) maintains rates at 2.9%. However, market expectations suggest the ECB may cut rates sooner than anticipated. This would weaken the euro.
• Business Confidence Decline: The latest Eurozone business confidence reading was -0.94, reflecting a continued lack of optimism.

Australia: Resilient Economy and Strong Trade Balance

• GDP Growth: Australia’s 0.3% quarterly growth indicates steady economic expansion.
• Inflation & Interest Rates: Australia’s 2.4% inflation rate remains within the Reserve Bank of Australia’s (RBA) range. Interest rates remain high at 4.1%, providing AUD with a yield advantage.
• Trade Surplus: Australia continues to benefit from a strong trade surplus (5,085M), driven by commodity exports, which supports AUD demand.

With the Eurozone showing signs of economic stagnation and Australia maintaining stronger growth and higher interest rates, the EUR/AUD bias remains bearish.

Technical Analysis

The EUR/AUD daily chart confirms the bearish macroeconomic outlook, with price action in the EUR/AUD pair suggesting further downside potential.

Ichimoku Cloud Analysis

✔ Base Line (1.6574) > Conversion Line (1.6495): Indicates bearish momentum.
✔ Lagging Span is below price: Further validates the downtrend.

Momentum Indicators

✔ RSI at 42.91: Shows moderate bearish momentum, but not oversold yet.
✔ Volume Increasing: Selling pressure remains dominant.

Key Price Levels to Watch

• Support: 1.6400
• Resistance: 1.6535

A break below 1.6400 could trigger further declines toward 1.6250. Resistance at 1.6535 is expected to cap any short-term pullbacks.

Sentiment Analysis

• Eurozone Sentiment Weakening: The ECB’s unclear monetary stance and economic stagnation keep the euro under pressure in the EUR/AUD pair.
• Australian Dollar Demand: AUD remains in demand due to higher interest rates and trade balance strength.
• Market Positioning: Investors have started reducing EUR long positions, further supporting a bearish EUR/AUD outlook.

Conclusion

The EUR/AUD outlook remains bearish. Economic fundamentals, technical analysis, and sentiment are aligning for further downside. As long as price stays below the 1.6535 resistance level, the bearish structure remains intact. There are potential targets at 1.6400 and 1.6250.

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