This currency pair is a confrontation between two weak currencies, which is confirmed by the long flat trend that we have observed on the chart for a long time. However, since March, the resistance line was broken, after which the rates sharply rushed up in favor of the euro. In March, with new macroeconomic reports for February, investors were able to fully evaluate the consequences of the quarantine in China, which led to a 13.5% drop in industrial production output, the strongest drop in 30 years. Therefore, it is understandable that investors began to sell off commodity currencies.
The euro is also under pressure, given also that the EU has become the new epicenter of the pandemic. EU countries are closing their borders and suspending production, but these measures are not enough yet. The EU is also forced to spend billions to support the economy and its citizens under quarantine. Therefore, the AUD managed to retreat from the 11-year highs reached on Thursday. Unemployment decreased to 5.1% in these difficult conditions and a reduction in the rate to 0.25% on Friday also encouraged the AUD to strengthen.
Next week, the publication of a report on business activity in Germany and the eurozone, as well as the further spread of the coronavirus in the EU, are expected. This will put pressure on the euro more than the AUD, being under the influence of the situation in China, where at least the pandemic is slowly improving. At the same time, we can see that the Stochastic and MACD oscillators indicate the rates in the overbought zone and confirm the efficiency of short deals in the short and medium terms. Even if we are talking about a price correction, it has only just begun and you can still earn money on it.
