Australian Dollar rises on promising China rumors
04 January 2023
Early before the European session, outlets reported the news that China is considering lifting the ban on Australian coal. This is definitely a piece of positive information for Australia and its currency, so there was no surprise that the AUD surged on this news. This move allowed the creation of a very interesting setup on the EURAUD who had been moving in a very technical way for weeks.
We covered the situation on the EURAUD many times, but as a reminder - the pair formed a sideways trend between the resistance at 1.568 (yellow) and support at 1.53 (orange). In the middle of December, the price escaped this sideways trend to the upside, which was supposed to be a proper buy signal. After a few days, a wedge-shaped correction started (green). Inside the wedge, the price aimed at the combination of the horizontal support on 1.568 and dynamic up trendline (black). This was supposed to be an unbreakable bullish stronghold but happened to be the opposite.
The price broke the two supports creating a major sell signal. All bullish patterns and elements failed. The negative sentiment is on and the target for this drop is the orange area again. The chances of getting there are quite high.