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Market Outlook
Is Daily Resistance Able to Hold the EURAUD Bullish Structure?

Is Daily Resistance Able to Hold the EURAUD Bullish Structure?

18-01-2022 06:48

EURAUD continues to show strength - but can it break through resistance?

The EURAUD pair has surged by over 200 pips since the start of 2022. This is due to Omicron cases and the different ways in which both regions are handling the situation. Some European countries are carrying on business as usual amid the increasing spread of Omicron. Meanwhile, Australia has imposed a lockdown to break the spread of the Coronavirus chain. So obviously, the wheels of the economy are rolling better on the European continent.

On the other hand, the German industry is expected to grow to 3.5% in 2022, while Spain's tourism sector should reached 88% of its pre-pandemic size this year. This could be a catalyst for EURAUD to remain bullish, however we will need to see if, technically, the price will be able to surpass its resistance.

Quick Recap on EUR/AUD

EURAUD has tended to be stable since 2021, with a spread of 800 pips of price fluctuations. Is there a chance for EURAUD to go bullish in 2022?

Let's dive in a little deeper to see how EUR/AUD fare on multiple timeframes:

EUR/AUD Monthly Technical Analysis

Is Daily Resistance Able to Hold the EURAUD Bullish Structure?

For the past few months, the pair has been observed in an area ranging between 1.61550 as resistance and 1.53500 as support. The price had jumped towards resistance after bouncing from the 100 and 200 MA cross lines last November. However, the December candle posted a weakening after bouncing from its long-term resistance which was also held by the 50 MA line as dynamic resistance.

EUR/AUD Weekly Technical Analysis

Is Daily Resistance Able to Hold the EURAUD Bullish Structure?

Last week's weekly candle was closed by a doji, which indicated the absence of a clear direction of price movement on the threshold of daily resistance. This week's candle has also managed to surpass the highest level from last week, which indicates that a higher high has been formed in the lower timeframe. The 50 MA line also seems to maintain the EURAUD price movement and acts as support.

EUR/AUD Daily Technical Analysis

Is Daily Resistance Able to Hold the EURAUD Bullish Structure?

On a daily basis, it is clear that the price continues to form a higher low. The price is confirmed to be in a bullish sentiment supported by the 50, 100 and 200 MA lines below the price. Yesterday's daily candle was closed by the doji still below the daily resistance.

Trading idea for EUR/AUD

Is Daily Resistance Able to Hold the EURAUD Bullish Structure?

On the H4 timeframe, we can draw an uptrend line that was created in early January 2022. Assuming that the price can break the resistance area and be protected by the MA line, then we can anticipate:

Order: Buy Limit
Entry: 1.57500
Stop Loss: 1.56750
Target 1: 1.58500 (50% + BE)
Target 2: 1.59000 (25%)
Target 3: 1.61000 (25%)
Total risk: 1-2% Equity (Medium Risk Setup)
Reason: Bullish structure, inverted head & shoulder pattern, confluence uptrend line & support area

ZFX Analyst’s Predictions

Australian consumer sentiment fell 7.6% last week to its lowest level since October 2020 - lower than during the Delta variant spike when most of the country was officially in lockdown. Gareth Aird, CBA's head of Australian economics, believes the outbreak could result in a cut of over 1% of gross domestic product growth. The weakening of the Australian economy is predictable for the first quarter of 2022, whereas for the March quarter it is expected to fall to 1.0% from the previous estimate of 2.3%. This is mainly due to the lockdown which has seriously disrupted the economic recovery of the kangaroo country.

Regarding European countries, they have begun to see a brighter future, with an estimate of the German industry growing to 3.5% this year and the Spanish tourism sector gradually starting to recover from the hit of the pandemic. Let's see if the weakening AUD and the strengthening of EUR can fundamentally bring gains for EURAUD in the near future.

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Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.

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