The exotic EUR/AUD cross rose 0.6% during the EU session on Tuesday and climbed back above the critical 1.60 handle, implying the recent correction might be over. Volatility has been elevated today due to main macro events.
Negative RBA fallout sends AUD lower
The Reserve Bank of Australia (RBA) tapered its bond purchases from 5 billion AUD to 4 billion AUD a week earlier in the day. That step had been widely expected, thus no surprises there. The new pace of 4 billion AUD a week should stay unchanged at least till February 2022.
However, the following statement was slightly negative. The Australian central bank expects a slowdown in the third quarter GDP , mainly due to the neverending coronavirus lockdown and restrictions.
Therefore, the initial reaction to the tapering news was bullish, and the Australian dollar strengthened. Still, the disappointing statement sent the AUD sharply lower, with the AUD/USD pair down more than 0.5% on Tuesday.
EU data undermine Euro
The focus of market participants then turned to a batch of EU data. German industrial production for July improved to 1% from -1% previously , with the yearly basis also moving higher. On the other hand, the German ZEW survey surprised to the downside, with the economic sentiment dropping sharply to 26.5, from 40.4 previously. The current situation improved slightly, but that is the least essential subindex as markets are forward-looking. The Eurozone ZEW Economic Sentiment for September slumped to 31.1 for the current month, compared to the 42.7 in August and 52.2 forecast.
Market experts expect the economic situation to improve. Yet, the scope and dynamics of the recovery have been significantly reduced. Chip shortages in the automotive sector and scarcity of resources in construction have significantly impacted expectations in those sectors, ZEW President Achim Wambach said in the following message.
From other news, the EU GDP for the second quarter rose 14.3% year-on-year, better than expected. Furthermore, the quarterly change jumped 2.2%, above the 2% scored previously. Lastly, the employment change rose more than expected in the same quarter.
Medium-term uptrend remains intact for now
Technically speaking, the EUR/AUD cross remains in a medium-term uptrend. Therefore, the latest correction will most likely be bought. However, the Euro has already surged above the 50-day moving average at 1.6010. Additionally, it looks like a double bottom pattern on the daily chart, with the support at 1.59 and the full potential of the formation circa 500 pips.
The next target for bulls is expected to be at 1.6115, afterward at 1.6170. The medium-term resistance is located at the current cycle highs near 1.6400, where the EUR/AUD cross topped in August.
Alternatively, if the price declines back below the 1.60 threshold, it might revisit the 1.59 support. Falling below it would most likely cancel the medium-term uptrend with a possible drop to the uptrend line at 1.5750.
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