Retail Heavily Short
The retail market is holding a large short position in EURAUD, currently sitting around the 85% level. However, EUR has emerged as one of the strongest performers today suggesting plenty of potential for the pair to continue trading higher, extending the bull trend which has described price action over recent weeks. The focus on sticky eurozone inflation recently Is keeping the hawkish ECB outlook intact. Meanwhile, with the RBA having recently paused its tightening campaign, there is growing divergence in monetary policy expectations between the two central banks. While this remains the case, EUR looks set to continue to gain ground against AUD.
Near-Term Risks
Today, the US CPI report will be the key market focus point – followed by the FOMC minutes later today. If the general outcome from both events today is a weaker USD, this looks likely to favour EUR more near-term, keeping the potential for further EURAUD upside in focus. The IMF was also seen this week warning over the downside risks to the Australian economy from mortgage default risks within the housing market. Citing the impact of excessive household debt and higher interest rates, the IMF warned that risks from the housing market in Australia are the second highest among developed nations. This is likely to have some dampening impact on AUD near-term.
Technical Views
EURAUD
The pair continues to travel higher within the bull channel which has framed the recent topside move. Currently, price is stalled against the 1.6428 level highs. This level also marks the 2021 high watermark and is a big resistance level. Should we break higher here, the focus is on a further push towards the 1.6589 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.