The possibility of a new leg up unfolding in range

• EUR/AUD could form a new bullish track after hitting the low at the beginning of the month.
• It has formed various reversal patterns and signals that point to a more likely extension.

EUR/AUD hit a low of 1.6000 and started to rise last week, returning to the 1.6300s before returning to where it is currently consolidating in the 1.62s.

EUR/AUD Daily Chart

This is likely to be the start of a new leg higher in a long-term range, stretching from a floor to around 1.6000 and a currently tilted ceiling in the 1.65s. If so, then prices will likely continue higher.

A break above Tuesday’s high of 1.6354 would likely indicate a continuation of the red 50-day simple moving average (SMA) at 1.6433. A break above would likely lead to a move to the top of the range around 1.6550.

The blue momentum indicator of the Moving Average Convergence Divergence (MACD) has crossed above its red signal line, giving a buy signal and adding to the bullish evidence.

EUR/AUD formed a Three White Soldiers Japanese candlestick pattern after the October 3 bottom (green shaded rectangle on the chart), indicating a possible near-term trend reversal. This happens after a downtrend when three consecutive up days form.

Although the pair formed a Shooting Star candlestick on Tuesday after the market peaked and then declined again to near the open, the day ended in green rather than red, diminishing its bearish significance. It was also not followed by a down day immediately after which would have given further bearish confirmation (red rectangle on the chart).