Forecast for the EUR/AUD Pair
EUR/AUD from an Economic Perspective
The EUR/AUD pair fell on Tuesday as investors turned their attention to the European Central Bank’s Sintra Forum and the latest inflation data from major European economies.
The highlight is Wednesday’s panel discussion with European Central Bank President Christine Lagarde, as markets seek clues regarding economic assessments and monetary policy directions.
The ceasefire between the United States and Iran, which reopened the Strait of Hormuz, has also led to lower oil prices and inflation expectations, prompting markets to scale back their bets on an interest rate hike by the European Central Bank.
Meanwhile, in Australia, the Australian dollar fell to a three-month low against the U.S. dollar on Tuesday, while mixed comments from the Reserve Bank of Australia regarding interest rate expectations kept yield spreads low.
Minutes from the Reserve Bank of Australia’s June monetary policy meeting showed that the board still sees risks of rising inflation and is prepared to raise interest rates again if necessary, after raising them three times this year.
One of the main concerns had been inflationary pressure from oil prices, but Brent crude has since fallen 13%, returning to its level prior to the U.S.-Israeli attack on Iran.
Board members also expressed growing concern about the risk of a sharp downturn in the housing market.
Taylor Nugent, chief economist at NAB, said, “It is still too early for the Reserve Bank of Australia to feel completely comfortable, but we expect the Board to keep its monetary policy unchanged, and it needs clearer economic data to take further steps to tighten monetary policy.
Markets are pricing in only a 15% probability of a hike in the 4.35% cash rate at the RBA’s next meeting in August, and a 60% probability that rate hikes will pause for this cycle.
A rate cut is also expected for the first time in late 2027.
EUR/AUD from a Technical Perspective
The pair retreated today toward the 1.6565 level, attempting to reach the uptrend line on the hourly chart, which is centered near the 1.6555/50 support levels.
If it reaches the uptrend levels, it may be possible to start buying the pair immediately or wait for any reversal candles from these levels to confirm the entry.
We target 1.6600 as an initial target, followed by 1.6660, and finally the completion of the Bat harmonic pattern near 1.6760.
However, if the pair breaks below 1.6550 and closes below it for two hourly candles, the decline could continue to the next support levels at 1.6510/15, where a buy position can be taken.
