Above is an update of the EURAUD chart that I presented in my past blog. As you can see, the euro has been gaining some upward momentum against the Australian dollar during the last several days. After reaching a low of 1.39242 last May 16, the pair has bounced all the way near the 1.4800 region, breaking above the descending channel that I marked in its daily chart above. The bias, however, remains bearish given its long term downtrend. In my view, the EUR could move somewhere between 1.4600 and 1.4800 or below the long term downtrend resistance against the Aussie before moving lower again. In case the pair breaches the 1.4800 hurdle and the long term downtrend line, it could easily aim for the 1.5000 marker.
Fundamentally, Asian equities and currencies like the Aussie dipped this morning as Japan’s first quarter GDP growth missed the market’s 1.4% target. The Land of the Rising Sun’s economic output from January to the end of March this 2010 only grew by a measly 1.2%. The country’s GDP performance during the 4Q of 2009 was also revised downward to 1.0% from 1.1%. Despite rising at a fastest pace during the last 3 quarters with a 4.9% annualized growth, this increase was short of the 5.5% forecast. Moreover, the country’s remains stuck in a deflationary environment. Japan’s relatively weaker quarter gross domestic marks added on the investors’ already bearish sentiment, prompting them to liquidate higher yielding currencies like the Aussie.
The pair, though, could continue its descent since there are no positive developments in the euro zone as of yet regarding the region’s debt crisis. More questions would only surface about the effectiveness of Germany’s recent ban on naked short selling and credit default swaps on the area’s debt situation. And as long as there are doubts, the overall sentiment would remain pessimistic.