In today’s technical analysis, let’s take a look at the euro versus the Australian dollar. From a broader perspective, this pair remains in a mid-term downtrend. However, over the past few days, price action has shifted into a sideways phase, forming a clear consolidation marked with an orange rectangle. Since Thursday, EUR/AUD has been moving within this narrow range, signaling hesitation after the prior decline.
Yesterday, we saw an attempt to break out of this consolidation to the upside. Price briefly moved above the upper boundary of the rectangle, but the move lacked follow-through and quickly reversed back into the range. This behavior can be classified as a false breakout, which often leads to a move in the opposite direction. That scenario initially played out, with price dropping toward the lower boundary of the rectangle.
This downside move was supported by fundamentals. Overnight, inflation data from Australia came in stronger than expected on a monthly basis, printing at 1.0% versus the 0.7% forecast. That surprise temporarily strengthened the Australian dollar and helped push EUR/AUD down to the lower edge of the consolidation. However, this strength proved to be short-lived. Price rebounded sharply, indicating that the market was not ready to extend the move beyond the range.
As we move into the European session, the key question is whether traders will attempt to rebuild Australian dollar strength or whether the euro will regain control. From a technical standpoint, as long as price remains inside the rectangle, the setup remains neutral and unattractive from a trading perspective. The market is clearly waiting for a decisive breakout.
The conclusion here is straightforward. EUR/AUD is currently non-tradable from a directional standpoint. A clear and sustained breakout above or below the rectangle is required to generate a proper trading signal and define the next move. Until then, patience is the best strategy.