Based on a note by analysts Daniel Been and Giulia Specchia
- EUR/AUD may rise as focus on weakness in Australia’s housing market increases
- At the same time ECB moves towards tightening
- There is some chance the market will start to price in a less positive outlook for Australia’s growth
- A calmer political front in Europe together with ECB’s continued signal it wants to move towards tightening means euro is looking more positive
- Hawkish tilt by the ECB and a progressively more relaxed policy environment mean the euro is cheap, but won’t remain cheap much longer
- Recommends going long EUR/AUD at 1.5492, target of 1.6190, stop at 1.5200
I like the trade idea, but personally I wouldn’t agree on those levels mentioned. Right now, the pair is running into resistance at the 200-day MA (blue line) and further up there is the 1 June high @ 1.5531. I’d rather get further bullish confirmation on a break of those two levels to justify an entry with risk being defined by a move that breaches below the 200-day MA instead.