#EURAUD has retested the key head and shoulders neckline resistance and started to consolidate.
Will the market move lower or higher from this level?
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The price of the EURAUD has been moving higher due to the weakening Australian dollar. However, the price is now at the neckline of the major head and shoulders pattern. Will the price find resistance here or will the price break higher?
From a fundamental perspective this market should continue higher as the market has remained in a risk off environment due to the recent Covid updates. Also the Euro has been strengthening as the ECB has kept rates very low instead of hiking like many other countries. The Australian Dollar has been weakening not only due to the risk off sentiment but also other factors including unemployment rising and GDP falling.
However, despite this the market has reached the major resistance level where sellers could re enter the market. If they do then we would likely see the market break out of the consolidative pattern shown in the 4hr time frame. If the market forms a breakout and a lower high pattern we can assume the market is going to reverse and look for short opportunities.
Alternatively, if the fundamentals remain we could see the price break above the neckline and head back towards the right shoulder of the pattern. In this case the 4hr trend would not change and the price would continue in its upward direction.
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