By: Mike Kulej
When the Australian Dollar was reaching the all time high against the US Dollar, it was also getting much stronger in relation to other currencies. Some of them moved to all time extremes, too. The EUR-AUD cross made the new record low several times, eventually falling to 1.2925 in late December.
Earlier this week, however, the EUR-AUD started to rebound. The pair staged a 400 pips rally, which gave the appearance of a potentially larger bullish move. It broke above the latest minor high of 1.3166 and even poked through the down trendline. This trendline is very important, because it managed to contain the price for the past few months and breaking through it could have serious bullish implications.
However, the EUR-AUD could not maintain the upward momentum and fell under the trendline once again. This means that the main down trend is still in force even though this pair maybe building a large bottoming pattern. Chances for that will increase if the trendline is broken again and this time the price stays above it.
False breakouts like the one above can be filtered using the Three Line Break chart, applying it as a confirmation. With a smoothed out price action, there was no move above the trendline drawn there. On balance, the trend in the EUR-AUD is still bearish.