EURAUD, H4 and Daily
Eurozone HICP inflation rose to 1.9% y/y in June as expected and up from 1.9% y/y in the previous month. The uptick owed much to rising energy price inflation, and excluding energy the rate held steady at 1.4% y/y, while core actually decelerated to 1.0% from 1.1%. Energy price inflation meanwhile accelerated to 8.0% y/y from 6.1% y/y and prices for food, alcohol and tobacco rose 2.8% y/y, after 2.5% y/y in May. So, while the headline rate is now in line with the ECB’s upper limit for price stability, the sharp acceleration from the 1.2% y/y in April, is largely due to transitory factors and base effects and nothing to necessarily worry about. The underlying picture remains that of gradually rising inflation, although with wage growth picking up and house price inflation in some areas looking outright worrying Draghi’s pledge to keep key rates unchanged until well into the second half of next year may come back to haunt the central bank.
The positive momentum in all Euro crosses boosted further on Eurozone’s HICP inflation release. The Euro is outperforming since yesterday as it found some strong demand on news that EU members had thrashed out the deal on immigration. The deal aims to shore up external borders and create screening centres for migrants, which is seen as placating the Italian populist government and broader Eurosceptic, populist movements across the region.
EURAUD flipped at 1.5786, reversed lower on London open and then returned back up to latest highs once the data released. Overall, the EURAUD is heading northwards since June 5 as it is constantly composing higher daily lows.
In the Daily chart, despite the slight swing lower for 3 consecutive days, the small body of these candles along with the long up tails reinforce the positive momentum for the pair. The cross is trading above all 3 MAs, i.e. 20, 50 and 200-Day SMA. Meanwhile, there is a clear positive configuration on momentum indicators, with a small shortterm corrective move the last 3 days within the upchannel. RSI is rising above 60 with higher highs and higher lows, suggesting that there is plenty of room to the upside, whilst MACD remains close to the neutral zone. Stochastic as a faster indicator, slipped lower for 5 consecutive session but remained above neutral in June, while it is currently pointing to the upwards again.
A close today above the recent highs at 1.5825, would re-open Resistance at 1.5915 and 1.5970. Support come at 1.5650.
The 4-hour timeframe supports the positive scenario as well, considering the positive configuration on momentum indicators and significantly that the EURAUD remains above 20 and 50-period SMA. The 50-period MA has been providing a strong Support area for the pair from June 7. Therefore in the medium term, as the buyers seem to remain in the major control of the pair, the hold above PP level could imply further pressure on the recent highs within 1.5813-1.5840 area. Support is around 1.5711/1.5690 (i.e. PP level/ S1).
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Andria Pichidi
Market Analyst
HotForex
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