Forex: EUR/AUD completes “bull flag” pattern on daily chart, targets 1.3050

FXstreet.com (Barcelona) - The EUR/AUD finished the session sharply higher, closing up 125 pips at 1.2824. The day was dominated by a “risk off" theme across asset classes with both equities and commodities suffering steep losses. The ISM Manufacturing PMI missed estimates early in the NY session, which was the initial catalyst to propel EUR/AUD upward.

According to analysts at RBS, “The AUD fell independently of other currencies (although the NZD followed suit) suddenly overnight. This appears related to increased speculation of a rate cut as soon as May. A cut in May has edged up to be 41% priced in and 92% priced in for June. Its fall was also timed with the weaker than expected ADP US employment report and a sudden drop in copper and gold prices.”

From a technical perspective, the pair looks to have broken out of its recent “bull flag” continuation pattern on the daily chart which has a measured move target of 1.3050. Any pullbacks to the 1.2750 will need to hold on a close, or the pattern will be negated. First support sits at 1.2750 (above mentioned level), followed by 1.2625 (the 20dma). Initial resistance sits at 1.2866 (high of session, followed by 1.2930 (previous support, now resistance on monthly chart).