EURAUD is now at a crucial level after forming a head and shoulders pattern. If the price breaks the neckline of the pattern we could see a significant move lower.
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The EURAUD price could move lower due to a number of factors. Fundamentally the Australian dollar could strengthen as the Commitment of Trader reports highlight strong commercial buying at current prices. This can often lead to a reversal in the current trends for the currency, we also looked at the AUDUSD chart in our week ahead analysis and highlighted the potential for the market to break the weekly highs.
Technically, the price has formed a head and shoulders pattern which is a trend reversal pattern. If the price breaks the low we could look for the downwards trend to continue. Measuring the head to the neckline, if we were to see a measured move after the breakout we could see the price move a lot lower back to the major swing lows.
The 4hr time frame could offer short term short opportunities if the price was to complete the head and shoulders pattern. Currently this time frame is in a downtrend making lower highs and lower lows. If the price retests the recent swing lows and rejects forming bearish price action we can look to short the market.
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