By: Mike Kulej
The EUR-AUD has been in a downtrend since the financial crisis erupted in 2008. After reaching the all time high, this pair has been in a steady downtrend, perhaps better described as a free fall. The price seems to be making new lows constantly and reached yet another one on Tuesday at 1.3107.
During this entire time, the EUR-AUD has not made very few corrections. All of them were short-lived and very small by comparison to the magnitude of the total sell off. It is very unusual in currency trading, especially among the “majors”. These kinds of one-sided moves eventually end, more often than not in a dramatic fashion.
Over the last few days, the pace of the sell off accelerated, showing properties of a parabolic price run. We can see it by drawing ever-steeper trendline, yet the price stays well below them. These conditions are often present shortly before a change in the prevailing trend, or at least a strong correction.
Technical indicators are severely oversold, supporting a possible correction in the near future. What is needed now is a strong reversal candlestick formation on either the daily or the weekly chart. That could signal the start of significant correction in the EUR-AUD, measured in hundreds, or more, pips.