EUR/AUD Forecast: Euro Faces Bearish Breakdown Below 1.60 As French Debt Concerns Persist

Potential signal:

• I am selling on a 4-hour close below 1.60, with a stop-loss at the 1.61 level.

• I am aiming for a move down to the 1.5730 region.

• The euro initially tried to turn things around against the Aussie, but those French debt problems continue to offer downward pressure.

EUR/AUD

The euro initially did rally a bit during the trading session on Tuesday against the Australian dollar, but it turned right back around to fall again.

This is a market that's going to be interesting to watch because, quite frankly, the interest rate differential isn't much between Germany and Australia. More importantly, we have a situation where European yields are probably overridden by what happens in one particular country, and that's France. The fiscal discipline, or lack of fiscal discipline, coming out of France is something that people are concerned about and continues to weigh upon the euro.'

The 1.60 level underneath is a large, round, psychologically significant figure

At this point in time, Australia is a little bit more hawkish, but it is also worth noting that Australia has the advantage of exporting things like copper. With that being said, it does make a certain amount of sense that we sell into rallies at this point, and we have seen that happen right around the 50-day EMA.

The 1.60 level underneath is a large, round, psychologically significant figure, and breaking down below there, especially when you look at the importance of this level over the last four or five years, I think the market could really fall apart. At that juncture, I think it gets a lot more aggressive.

Rallies at this point are very difficult to get excited about, at least until the situation in France solves itself. If and when it does, then fine, the entire outlook for the pair changes. But as things stand right now, this looks like a market that's trying to do everything it can to fall apart.