Above is an update of the EURAUD chart analysis that I presented last May 20, 2010. As you can see, the pair punched through its downtrend line and all the way up until it encountered some resistance at the psychological 1.5400 handle. Notice that 1.5400 was previously a support and as soon as it touched the mentioned mark, it then turned around and fell again. At present, it is hovering just above the downtrend line. Now, this former price fence could switch its role into a support that would give the pair some lift. If it does, it could force the pair to at least move sideways or to even rally again. On the other hand, if the said net does not hold, it could fall straight back down to the 1.3900 territory again. But since there is no apparent sign of reversal yet, I’d say that the pair still has a higher chance of trekking south.
On the fundamental front, the sinking a South Korean naval ship by its northern neighbor has added new fears in the market, causing most of the global stocks and anti-dollar currencies to dip. Between the euro and Australian dollar, it is obvious that the euro is the weaker one. In fact, it is now running as the number one candidate for the Worse Performing Currency Award in 2010 due to the ongoing debt crisis in Europe. Going back, it is likely that South Korea will push for some hard sanctions against President Kim Jong Il and his country. This, however, could drive the north to possibly have some sort of ‘missile testing’ like what they did last year as a sign of threat to the other countries. This then could spark some risk aversion, leading to a sell-off in the markets. North Korea is a considered as a bully in the Eastern block. As much as I want them to make peace and be sorry, it’s very unlikely that they will actually bow down to any other country.