EURAUD Regains Momentum as Aussie Struggles with China DemandEURAUD is bouncing back from its recent lows as the euro finds renewed footing amid stabilizing European data, while the Australian dollar continues to face headwinds from China’s sluggish demand and a cautious RBA. The pair has regained short-term traction, but a retest of support before a continuation higher remains a likely technical scenario.
Current Bias
Bullish, with potential for a near-term pullback toward support before resuming higher toward 1.7930 and 1.8160.
Key Fundamental Drivers
Eurozone: Inflation has cooled, but the ECB maintains a restrictive stance for longer, citing a slow disinflation path. Recent data suggest stabilization in manufacturing, keeping EUR sentiment supported.
Australia: The RBA remains cautious, citing mixed employment and slowing household spending. China’s uneven recovery and weaker commodity demand continue to weigh on the AUD.
Yield Differential: Slightly favors the euro as ECB holds higher rates for longer compared to the RBA’s neutral bias.
Macro Context
The broader macro backdrop supports moderate EUR strength against AUD. Europe’s soft landing narrative contrasts with Australia’s export dependence on China, where growth momentum remains weak. Commodity flows, particularly iron ore and LNG, are subdued, limiting AUD upside. Meanwhile, geopolitical stability in Europe provides relative support to the euro, especially as global risk sentiment fluctuates.
Interest rate expectations:
ECB: Expected to hold rates into Q2 2026, with cuts only if inflation undershoots the 2% target.
RBA: Markets lean toward potential easing mid-2026 if consumption weakens further.
Growth trends remain in Europe’s favor relative to expectations, while Australia’s domestic softness and high mortgage costs curb expansion.
Primary Risk to the Trend
A stronger-than-expected rebound in China’s industrial output or commodity prices could lift AUD sharply, forcing EURAUD lower. Conversely, an ECB dovish pivot or renewed eurozone fiscal stress could undermine euro resilience.
Most Critical Upcoming News/Event
RBA Statement and Governor Bullock speech (for forward guidance on rates)
Eurozone Q3 GDP revision and inflation expectations data
China trade and inflation prints (key sentiment driver for AUD)
Leader/Lagger Dynamics
EURAUD acts as a lagger to EURUSD direction but leads cross pairs like EURNZD and GBPAUD due to its balance between growth sensitivity and yield divergence. It also mirrors shifts in commodity-linked risk sentiment while tracking China’s macro outlook indirectly.
Key Levels
Support Levels: 1.7750 / 1.7560
Resistance Levels: 1.7930 / 1.8160
Stop Loss (SL): 1.7520
Take Profit (TP): 1.7930 (partial), 1.8160 (extended)
Summary: Bias and Watchpoints
EURAUD’s current structure supports a bullish bias, reinforced by Europe’s relative policy stability and Australia’s commodity-linked weakness. A short-term dip toward 1.7750 could offer renewed buying interest, targeting 1.7930 and 1.8160 while keeping SL at 1.7520 to protect against a deeper retracement. The main watchpoints ahead are RBA communication and China’s macro data — both potential catalysts that could challenge euro gains. For now, the bias remains constructive while fundamentals and yield spreads lean in favor of EUR strength.
