Is the Australian dollar ready to rally? There’s some significant potential for such a scenario this week, after higher than expected Chinese CPI numbers last night and ahead of the RBA Meeting Minutes due out later tonight. Even if that fails to spark volatility in the Aussie, the release of Chinese GDP later week should certainly create a strong move in Aussie crosses.
EUR/AUD provides a very nice way to trade the Australian dollar while still avoiding some of the political problems currently creating trouble in the USD – cross pairs have been less susceptible to news-induced volatility we’ve seen lately.
There is also a compelling technical setup on EUR/AUD that is suggesting Aussie strength. The pair is currently testing the neckline of a major head and shoulders pattern on the daily and four hour charts. A break of 1.4270 suggests a move down toward the 200 day EMA at 1.38.
Bears should keep their eye on the daily close on EUR/AUD, and look for the pair to sustain a break below that neckline before entering short.
Written by: Liam McMahon, Currency Strategist – GlobalFxClub.com