A Retrace to the Local Support Zone Could Open Buying Opportunities

Forex Economic

Summary:

For now, traders should wait for price action to offer a favorable risk-to-reward setup within this zone of interest.

Buy EURAUD

EXP

PENDING

1.63340

ENTRY

1.64930

TGT

1.62500

1.63931 -0.00038 -0.02%

Point

PENDING

1.62500

CLOSING

1.63340

ENTRY

1.64930

TGT

European Central Bank (ECB) Governing Council member and Governor of the National Bank of Slovakia, Peter Kazimir, reiterated a distinctly hawkish stance on monetary policy. The official noted that at least one additional interest rate hike will be necessary to prevent inflationary pressures from spilling over more broadly into the economy through second-round effects. In his view, the ECB must act preemptively, as once these effects materialize, they become far costlier to reverse. Furthermore, he warned that a deterioration in the inflation outlook could require a tighter monetary stance than currently anticipated.

On the trade front, the European Union continues to defend an approach rooted in economic openness and dialogue with its international partners. Both the European Commission and several member states have reiterated their preference for negotiations over protectionist measures. In this context, Brussels maintains active discussions with China, while simultaneously evaluating a broader use of trade defense tools to protect specific strategic sectors.

Meanwhile, macroeconomic data offered a positive signal for the region. The Eurozone economy grew by 0.4% quarter-over-quarter during the second quarter, beating both market expectations and the contraction recorded in the prior period. On an annual basis, Gross Domestic Product advanced by 1.0%, accelerating significantly compared to the previous quarter.

Expansion was relatively broad-based across the bloc's major economies. Germany posted a 0.2% quarter-over-quarter growth rate, accelerating its annual pace to 0.9%, while France returned to positive territory with a 0.2% gain. Italy also grew by 0.2%, whereas Spain stood out once again with a 0.7% expansion, topping market forecasts and solidifying its position as one of the region's most dynamic economies.

In Australia, inflation continued to moderate through June. The Consumer Price Index (CPI) decelerated to 3.8% year-over-year from 3.0% in May, coming in below analysts' expectations. This trajectory significantly reduced market bets favoring another rate hike by the Reserve Bank of Australia (RBA), putting downward pressure on the Australian dollar.

Following the data release, the implied probability of an August rate hike fell sharply, reflecting the view that the central bank holds more flexibility to maintain a wait-and-see approach. Nevertheless, monetary authorities remained cautious. RBA Assistant Governor Sarah Hunter noted that the slowdown in inflation was mainly driven by falling fuel prices, reminding markets that inflation still remains above the 2%-3% target range.

Additionally, Hunter emphasized that the labor market continues to show strength, with relatively tight employment conditions and job creation remaining resilient throughout the first half of the year. She also pointed out that the decline in economic confidence has not yet translated into a significant slowdown in household spending, a factor that monetary authorities will continue to monitor closely. A Retrace to the Local Support Zone Could Open Buying Opportunities_1

A Retrace to the Local Support Zone Could Open Buying Opportunities_1

Technical Analysis

EURAUD rejected lower after reaching the resistance level at 1.6493. This rejection off a key level could trigger a correction toward the local support area at 1.6334. Meanwhile, the 100 and 200-period moving averages sit at 1.6368 and 1.6412, respectively; price action has already closed below these levels, which could accelerate downward momentum toward the aforementioned support. If price tests this level and shows an upward rejection, we could see a bullish resumption that tests the resistance zone once again and attempts a breakout to continue its upward path.

Looking at the oscillators, the RSI quickly reached the 78 level upon hitting the resistance zone—an area where bulls lost control and bears made their move. However, the key point to observe is the MACD, which shows a bullish histogram that is rapidly losing depth as the downward pullback unfolds. The signal lines remain positioned well within bullish territory, meaning that if these lines do not complete a bearish crossover, the upward momentum could resume at a key level like the local support if an upward rejection occurs. For now, traders should wait for price action to offer a favorable risk-to-reward setup within this zone of interest.

Trading Recommendations

Trading direction: Buy

Entry price: 1.6334

Target price: 1.6493

Stop loss: 1.6250

Validity: Aug 12, 2026 15:00:00

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