Oversold Signals at Local Support Point to Potential Bullish Rejection

Summary:

A more important hidden factor is the divergence relative to the June 22 levels; despite similar price levels, the RSI shows a deeper reading now.

Buy EURAUD

EXP

PENDING

1.63220

ENTRY

1.65170

TGT

1.62760

1.63791 +0.00290 +0.18%

Point

PENDING

1.62760

CLOSING

1.63220

ENTRY

1.65170

TGT

In the geopolitical arena, reports surfaced on Thursday indicating that Iran has instructed Yemen's Houthi militia to stand ready to shut down the Red Sea oil shipping lane if the United States attacks Iranian power infrastructure, introducing a significant new threat to global energy supplies. This development follows remarks from earlier in the week when U.S. President Donald Trump threatened to strike Iran's bridges and power plants next week if the nation fails to return to negotiations.

Meanwhile, in Australia, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter reiterated that the institution will step in when necessary to ensure inflation returns to its target. Her statements come at a time when the recent rebound in oil prices has not yet led to a meaningful slowdown in economic activity.

So far this year, the RBA has implemented three 25-basis-point increases, lifting the Official Cash Rate (OCR) to 4.35%. However, markets have recently tempered their expectations for further rate hikes due to the deceleration observed in the monthly Consumer Price Index (CPI) over the past two months. Against this backdrop, investors will closely monitor the release of China's June inflation data on Thursday for fresh indications regarding regional demand trends.

In the Eurozone, several European Central Bank (ECB) officials have recently reaffirmed their readiness to tighten monetary policy further if inflationary risks intensify. Austrian Central Bank Governor and ECB Governing Council member Marin Kocher stated that the central bank is "ready to act" if second-round inflationary effects emerge, while Bundesbank President and ECB Governing Council member Joachim Nagel affirmed that it remains appropriate to "act decisively" if necessary.

Data released by Eurostat revealed that Eurozone Industrial Production contracted by 0.2% in May, missing market expectations of a 0.2% increase, and following an upwardly revised rise of 0.3% in April. In year-on-year terms, factory output across the countries sharing the Euro fell by 1.2%, following a 0.4% increase in April, which was more than double the 0.5% decline anticipated by market consensus.

In the Eurozone, final inflation data continued to point to a gradual moderation of price pressures. In Germany, the Harmonized Index of Consumer Prices (HICP) decelerated to 2.4% year-on-year in June from 2.7% in May, while prices pulled back by 0.2% in monthly terms. France showed a similar development, with annual inflation moderating to 2.0% from the previous 2.8% and a monthly price decline of 0.3%. Oversold Signals at Local Support Point to Potential Bullish Rejection_1

Oversold Signals at Local Support Point to Potential Bullish Rejection_1

Technical Analysis

EURAUD is trading very close to the local support level at 1.6233, a zone it previously tested on June 22 before bouncing upward. If this behavior repeats, it could offer a setup to capture a potential bullish move. The 100 and 200-period moving averages, currently located at 1.6349 and 1.6300 respectively, will act as dynamic resistance layers as the price approaches them. Meanwhile, upside targets are set at the 1.6517 level, which marks the next major resistance line to the upside.

Looking at the oscillators, the RSI is currently hovering at the 38 level, recovering from a low of 26 hit on July 15, which had driven the indicator into oversold territory. A more important hidden factor is the divergence relative to the June 22 levels; despite similar price levels, the RSI shows a deeper reading now, indicating that bearish momentum faded much faster this time. Concurrently, the MACD shows a histogram that has just crossed to the upside, though the signal lines remain embedded in negative territory, suggesting that this upward move currently has the characteristics of a temporary pullback.

Trading Recommendations

Trading direction: Buy

Entry price: 1.6322

Target price: 1.6517

Stop loss: 1.6276

Validity: Jul 29, 2026 15:00:00

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