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Third Defense of Local Support Opens the Door for a Bullish Recovery
Forex
Economic
Summary:
The latest reaction marks the third rejection of this support region, suggesting that buyers continue to show interest near these levels.
Buy
PENDINGEURAUD
EXP
1.60850
Entry Price
1.62330
TP
1.60000
SL
1.61130 -0.00070 -0.04%
--
Point
PENDING
1.60000
SL
CLOSING
1.60850
Entry Price
1.62330
TP
France presented its 2027 budget to parliament on Tuesday within the established deadline, and the additional yield demanded by investors on French 10-year debt relative to German bonds narrowed to around 1.3 percentage points from nearly 1.6 points at Friday’s peak. This spread has been an important driver for the Euro since late September, and its widening into last week encouraged traders to scale back expectations of another European Central Bank (ECB) rate increase. The budget projects France’s interest expenses at approximately €91 billion in 2027, exceeding planned spending on either defense or education.
Money markets were assigning roughly a 60% probability to an ECB rate increase at the October 29 meeting at the end of September. That figure has now fallen to around 14%, although a move higher by year-end continues to be priced in with a probability close to 80%.
ECB Chief Economist Philip Lane stated in an interview published on Tuesday that elevated energy costs have not yet generated significant second-round effects on wages or broader pricing pressures, suggesting that inflation transmission remains relatively contained for now.
Retail sales increased by 0.1% month-over-month in August, below expectations of 0.2%, following a 0.6% decline in July. On an annual basis, sales rose 0.8%, compared with forecasts of 1.0%. Fuel volumes remained 3.7% below levels recorded a year earlier, while food and other goods posted gains, indicating that the energy shock continues to influence consumer purchasing behavior.
In its Financial Stability Review (FSR) released on Thursday, the Reserve Bank of Australia (RBA) stated that households and businesses remain well positioned to cope with slower economic growth and lower housing prices. The central bank highlighted the resilience of domestic balance sheets despite a more challenging economic backdrop.
Australia’s trade surplus narrowed sharply to AUD 495 million in August from AUD 1.351 billion in the previous month, according to the latest external trade data released by the Australian Bureau of Statistics. The previous figure was also revised lower from AUD 1.923 billion, reflecting softer trade conditions during the period.
Expectations for a Reserve Bank of Australia rate increase in November declined significantly after the latest Consumer Price Index (CPI) report matched market expectations. Money markets now expect the Australian central bank to leave interest rates unchanged at its next policy meeting. According to LSEG data, the probability of a rate hike has fallen to approximately 20%.
Technical Analysis
EURAUD has once again reacted higher after testing the local support level at 1.6081, reinforcing the importance of this area as a zone that has been defended on multiple occasions. The latest reaction marks the third rejection of this support region, suggesting that buyers continue to show interest near these levels. As long as the pair fails to break decisively below this area, the possibility remains for a corrective move higher toward the resistance zone located at 1.6233.
The 100-period and 200-period moving averages are currently positioned at 1.6172 and 1.6184 respectively. Both indicators are located near the midpoint of the range between local support and resistance, reinforcing the validity of the current trading range and highlighting the importance of monitoring price action within these boundaries.
In the oscillator area, the RSI is currently trading near 39 after rebounding from the 29 level, where it briefly entered oversold territory. This recovery from oversold conditions increases the possibility that a corrective move higher may continue to develop following the recent downside pressure. Meanwhile, the MACD histogram has recently crossed into positive territory, although it still lacks significant depth and requires further confirmation through sustained momentum. The signal lines remain positioned within bearish territory, suggesting that the local support area could be tested again before a stronger recovery develops. Such consolidation could provide the necessary conditions for a bullish crossover in the signal lines, adding further weight to a potential upside move.
Trading Recommendations
Trading direction: Buy
Entry price: 1.6085
Target price: 1.6233
Stop loss: 1.6000
Validity: Oct 16, 2026 15:00:00
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