EUR/AUD: Levels, Ranges, Targets

What explains current price volatility is the vast majority of currency pairs trade around 5, 10 and 14 year averages. EUR/USD and USD/JPY for example trades between its 5 and 10 year, EUR/JPY trades around its 5 and 14 year, GBP/CAD is a 5 to 14, CHF/JPY is a 5 to 10., AUD/NZD and AUD/CHF are both challenging respective 5 years.

Then comes volatility in relation to currency pairs in the same universe such as GBP/CAD and GBP/AUD trade between 5 and 14 years while the remainder GBP pairs to include GBP/USD trade below 5, 10 and 14 year. Volatility in the GBP case is an alignment or possible misalignment issue.

Trade around 5, 10 and 14 year averages from a price perspective and on a smaller scale experiences volatility because certain price points encounter radical changes in the numbers. Markets attract to the price points as they offer best gains and if trading the price point entails sending a price to non normality or outer limits then price structures must adjust.

EUR/AUD broke above its 14 year average at 1.5315 in February and bolted 800 pips to 1.6161. EUR/AUD not only left its range tops from 1.5738 and 1.5710 but EUR/AUD’s price is far to high and its massively overbought from 1.5500’s to 1.4600’s. EUR/AUD retains the same range top position as EUR/GBP, USD/CAD and AUD/USD as the complete oppposite as AUD/USD is literally on the floor and awaits the spark to skyrocket higher. Part of AUD/USD deep bottom is explained by stratospheric EUR/AUD.

Overbought means EUR/AUD extreme prices are located at 1.6517, 1.6499, 1.6382 and 1.6248. The topside is severely blocked and its impossible to trade EUR/AUD long.

Longer term EUR/AUD must trade lower inside its range to 1.5533 and below. The 14 year average at 1.5315 offers a tough break and EUR/AUD could easily trade between 1.5533 to 1.5315. Overall EUR/AUD lacks a comfort zone unless 1.5315 breaks lower because EUR/AUD is overbought, outside ranges, high price and EUR/AUD wide movements are naturally built into its price.

Overall to travel lower, EUR/AUD must break 1.5787, 1.5738 and 1.5710. Upon a break of most vital 1.5710, EUR/AUD targets 1.5695, 1.5686 then on to 1.5500’s. From 1.5300’s to 1.5500’s, EUR/AUD becomes oversold, risks another bounce and informs how rough is the 1.5315 break. The daily perspective informs EUR/AUD must break 1.5979 to trade inside its daily range. EUR/AUD 1.5700’s to 1.6000’s will see its best volatility at 1.6013, 1.5968, 1.5923, 1.5856 and 1.5781.

EUR/AUD movements are extraordinarily wide both from a long and short term perspective and this explains by no other choice why analysis is viewed over wide ranges.

Brian Twomey